RPC research reveals leading banks face over one hundred class action lawsuits

Research from international law firm RPC has revealed the UK’s leading banks (in the FTSE 100) currently face at least 109 class action and group action lawsuits across different jurisdictions.

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 class and group actions were disclosed to shareholders of the banks concerned. Just under two-fifths (41) of the class and group actions related to interest rate manipulation of LIBOR and other interest rate benchmarks, while almost one-fifth (18) related to breaches of the US Anti-Terrorism Act. In third place came actions relating to the FX manipulation, where a number of banks admitted manipulation of various currency pairs. 

The LIBOR scandal concerned the alleged collusion of leading banks 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 related 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.

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. The cases could cost the banks billions of pounds.

Previously the preserve of the US and Australia, class and group action lawsuits have risen to prominence in the UK in recent years.

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

He said many of the cases related 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”, added Hart.

"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.”

RPC also explained class actions against banks have attracted increased levels of potential funding from litigation funders, which has, in turn, led to companies and individuals feeling confident about pursuing claims as the initial outlay cost is reduced. Often backed by hedge funds and PE houses, litigation funders finance the legal costs of a case in exchange for a share of the damages if successful.

RPC partner Daniel Hemming commented: “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”.