Economy
Eight big banks must face US cities’ bond collusion claims
© Reuters. A sign for the Royal Bank of Canada in Toronto, Ontario, Canada December 13, 2021. REUTERS/Carlos Osorio
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By Jonathan Stempel
NEW YORK (Reuters) – A U.S. federal judge on Thursday said American cities may pursue class-action claims accusing eight large banks of driving up interest rates they paid on a popular municipal bond.
U.S. District Judge Jesse Furman in Manhattan rejected efforts by Bank of America, Barclays, Citigroup (NYSE:), Goldman Sachs, JPMorgan Chase (NYSE:), Morgan Stanley, Royal Bank of Canada and Wells Fargo to require cities to pursue claims individually, likely reducing potential recoveries.
Cities led by Baltimore, Philadelphia and San Diego accused the banks of colluding to raise rates on more than 12,000 variable-rate demand obligations (VRDOs) from 2008 to 2016.
They said this reduced available funding for hospitals, power and water supplies, schools and transportation, and likely caused billions of dollars in damages.
Once a more than $400 billion market, VRDOs are long-term bonds with short-term rates that typically reset weekly. Banks must remarket VRDOs that investors redeem at the lowest possible rates.
Cities accused the eight banks of conspiring not to compete for remarketing services, and artificially inflating rates by sharing information about bond inventories and planned rate changes.
In opposing class certification, the banks said differences among the bonds would require many thousands of individualized examinations into whether rate inflation occurred, making a single class-action lawsuit unwieldy.
But in a 33-page decision, Furman said two financial markets specialists who the cities hired as expert witnesses established that the alleged collusion could have a class-wide impact.
“Of course, it remains an open question whether, assuming plaintiffs paid supra-competitive interest, that payment was caused by defendants’ allegedly anti-competitive behavior,” Furman wrote. “Whatever the answer to this question may be, however, it is a common question.”
Barclays, Citigroup and JPMorgan declined to comment. The other banks and their lawyers did not immediately respond to requests for comment.
Dan Brockett, a lawyer for the cities, said they were gratified by the decision.
The VRDOs market shrank to $72 billion by the end of 2022, according to the Municipal Securities Rulemaking Board.
The case is Philadelphia et al v Bank of America Corp (NYSE:) et al, U.S. District Court, Southern District of New York, No. 19-01608.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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