US sues 16 banks for rigging Libor rate

Some of the world's largest banks are accused of conspiring to keep a key global interest rate low to enrich themselves.

    The banks accused include Citigroup, JPMorgan Chase and Bank of America [AP]
    The banks accused include Citigroup, JPMorgan Chase and Bank of America [AP]

    The US Federal Deposit Insurance Corp. (FDIC) has sued 16 big banks that set a key global interest rate, accusing them of fraud and conspiring to keep the rate low to enrich themselves.

    The banks, which include Bank of America, Citigroup and JPMorgan Chase in the US, are among the world's largest.

    The FDIC says it is seeking to recover losses suffered from the rate manipulation by 10 US banks that failed during the financial crisis and were taken over by the agency.

    The civil lawsuit was filed on Friday in federal court in Manhattan, the Associated Press reported.

    The banks rigged the London interbank offered rate, or Libor, from August 2007 to at least mid-2011, the FDIC alleged.

    The Libor affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.

    A British banking trade group sets the Libor every morning after the 16 international banks submit estimates of what it costs them to borrow.

    The FDIC also sued that trade group, the British Bankers' Association.

    Previous fine

    By submitting false estimates of their borrowing costs used to calculate Libor, the 16 banks "fraudulently and collusively suppressed [the Libor rate], and they did so to their advantage," the FDIC said in the suit.

    Citigroup spokeswoman Danielle Romero-Apsilos, Bank of America spokesman Lawrence Grayson and JPMorgan spokesman Brian Marchiony declined to comment.

    Four of the banks - Britain's Barclays and Royal Bank of Scotland, Switzerland's biggest bank UBS and Rabobank of the Netherlands - have previously paid a total of about $3.6bn to settle US and European regulators' charges of rigging the Libor.

    The banks signed agreements with the US Justice Department that allow them to avoid criminal prosecution if they meet certain conditions.

    Under a change announced last July, the London-based company that owns the New York Stock Exchange, NYSE Euronext, will take over supervising the setting of Libor from the British Bankers' Association.

    The changeover is scheduled to be completed by early next year.

    SOURCE: AP


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