UK’s biggest banks facing 109 class action lawsuits

41 outstanding cases relate to interest rate manipulation; 18 concern terrorist financing

Litigation funders attracted by prospect of significant payouts

The UK’s leading banks* are facing at least 109 class action and group action lawsuits across different jurisdictions, which could potentially cost them billions of pounds, new research from international law firm RPC reveals. 

Just under two-fifths (41) of the class and group actions related to interest rate manipulation, while almost one-fifth (18) related to breaches of the US Anti-Terrorism Act.

The class and group actions were disclosed to shareholders of the banks concerned.

Class and group actions are mechanisms for bringing claims on behalf of hundreds or even thousands of claimants who collectively allege they have suffered loss due to the defendant's unlawful conduct.

Examples include situations where the defendant bank has participated in an illegal cartel to fix LIBOR or manipulated foreign exchange rates.  

Prevalent in the USA and Australia, class and group action lawsuits are becoming increasingly common in the UK and certain European jurisdictions.

Simon Hart, Partner at RPC, says: “It’s clear that the leading UK banks are still parties to an enormous number of legal disputes globally with customers and market counterparties.

“Many of these relate to legacy matters of compliance failings and market manipulation, the effects of which the banks are struggling to shake off.  

"However, the range of actions both in terms of subject matter and jurisdictions highlight the ongoing legal risks faced by banks.  

"It does not take much analysis to conclude that we will see ESG-related claims being added to this list over the next five years.

“Coupled with an increase in asset price volatility, a recessionary environment and litigation funders looking for more cases, over the short to medium term it is realistic to expect the number of class and group actions to grow globally.”

Class actions against banks have attracted increased levels of potential funding from litigation funders. 

Often backed by hedge funds and PE houses, Litigation funders, finance the legal costs of a company or individual’s case (ie they will pay for the lawyers and experts) in exchange for a share of the proceeds if the claimant is victorious.

Litigation funding is becoming increasingly established among corporates and individuals as they can pursue legal claims without risking their own money, explains RPC. 

Daniel Hemming, Partner at RPC, says: “Banks and other large UK corporates are likely to face a gradual rise in class actions. Often the quantum of these cases against the banks is so significant that litigation funders are front of the queue to back these class and group actions.  The funders also have a role to play in building the group of claimants where that is appropriate.

“Litigation funders have the potential to shift the balance of power in favour of claimants in these kinds of cases. Banks and other large corporates can no longer rely on the prohibitive cost of these cases putting off potential claimants."

Barclays faces the most class and group actions of all the UK’s biggest banks, with 41 cases against them, followed by HSBC with 31 and NatWest with 28. 

The most common type of case – making up over a third of the total – relates to manipulation of LIBOR and other interest rate benchmarks. The LIBOR scandal concerned the alleged collusion of leading banks, including Barclays, to manipulate the London Interbank Offered Rate, the rate at which banks borrow from each other. 

LIBOR was the reference rate for many billions of loans and derivatives.  In the wake of the scandal, LIBOR is being retired and the mechanisms for setting these rates has been radically reformed.

The next largest category of cases relates to breaches of the US Anti-Terrorism Act, where banks processed transactions which claimants allege were destined for terrorist organisations. This includes claims against major banks for handling funds sent to Iran, which the lawsuit alleges were then used to fund terrorist attacks on US service personnel in places such as Iraq and Afghanistan.

In third place comes actions relating to the FX manipulation, where a number of banks admitted manipulating various currency pairs.  

*UK banks in the FTSE 100