The Federal Deposit Insurance Corporation (FDIC) has sued 16 major banks, including Bank of America Corp and Barclays in Manhattan federal court for allegedly manipulating the London interbank offered rate (Libor).
The FDIC accused that the 16 banks have rigged the Libor from August 2007 to 2011 to pay lower interest rates to 38 failed banks including IndyMac Bank, Washington Mutual Bank and Colonial Bank.
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The other banks involved in the lawsuit include Credit Suisse, Deutsche Bank, HSBC Lloyds, Societe Generale, Norinchukin Bank and Bank of Tokyo-Mitsubishi, and Royal Bank of Canada. In addition, the FDIC also sued the trade group, British Bankers’ Association.
So far, some of the banks have paid about US$6 billion to resolve criminal and civil claims in the US and Europe over benchmark interest rates manipulation.
"The failed banks reasonably expected that accurate representations of competitive market forces, and not fraudulent conduct or collusion, would determine the benchmark," the FDIC said.
The regulator said the manipulation has caused substantial losses to 38 banks including 10 US banks that were closed during and after the 2008 financial crisis. FDIC alleged that the banks committed fraud and violated US antitrust laws in fixing the US dollar Libor benchmark.
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By GlobalDataIn addition, FDIC is seeking unspecified damages for losses suffered as a result of the low rate. The lawsuit claimed that the fixed rates resulted in the failed banks to pay higher prices for Libor-based financial products and to get lower interest payments from the defendants and others.
The FDIC said that global financial institutions broke certain swaps contracts they had entered into with the now-closed banks, by separately colluding to rig the Libor rate to which the contracts were tied.
