12 major banks agree to pay $1.87 bn to settle price fixing charges

Twelve major banks have tentatively agreed to pay $1.87 billion to  settle allegations that they colluded to fix prices and keep out competitors in the market for insurance-like products widely traded before the financial crisis, a lawyer for investors said.

If finalised, the deal would be one of the largest US anti-trust settlements, according to Daniel Brockett, a lawyer representing a Los Angeles pension fund among other plaintiffs.

He added, the final terms needed to be hammered out, the deal would still need to be approved by a judge.

According to a complaint filed in US District Court in New York, Bank of America, JPMorgan Chase, Citigroup and other banks at a secret meeting shot down proposals that would see trading of these insurance-like products done on an exchange through which they could be bought and sold like stocks and their prices made more transparent.

By keeping trading  private in a ''rigged'' market, investors had been cheated out of billions of dollars, the complaint alleged.

''There was no central place to go for a stream of prices. You had to go to the banks and they controlled the business and they charged high prices,'' said Brockett, a partner at Quinn Emanuel Urquhart & Sullivan. An investor ''basically had to pay what they wanted,'' The Associated Press reported.

The banks reached an agreement in principle with a group of investors that included the Angeles County Employees Retirement Association, Daniel Brockett, a lawyer for the group, told a judge in Manhattan federal court on Friday. The sides would need a week to 10 days hammer out some details, Brockett said.

With a settlement, a trial following group lawsuits by hedge funds, pension funds, university endowments, small banks and other investors that could stretch for years, would be averted.

According to investors, a dozen global banks - along with Markit Group Ltd, a market-information provider in which the banks owned stakes - conspired to control the information about the multi-trillion dollar credit-default swap market in violation of US antitrust laws.

The banks raked in ''billions of dollars in supracompetitive profits'' by taking advantage of ''price opacity in the CDS market,'' according to the investors.