FDIC sues 16 banks
WASHINGTON — The Federal Deposit Insurance Corp. 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 United States, are among the world's largest.
The FDIC says it is seeking to recover losses suffered from the rate manipulation by 10 U.S. 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 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.
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 declined to comment on the suit. Spokesmen for Bank of America and JPMorgan did not immediately return requests for 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 $3.6 billion to settle U.S. and European regulators' charges of rigging the LIBOR. The banks signed agreements with the Justice Department that allow them to avoid criminal prosecution if they meet certain conditions.
The process of setting the LIBOR fell under scrutiny when Barclays admitted in June 2012 that it had submitted false information to keep the rate low.
A number of U.S. cities and municipal agencies have filed suits against banks that set the LIBOR rate. They are seeking damages for losses sustained as a result of an artificially low rate. Local governments hold bonds and other investments whose value is pegged to LIBOR.
In addition, government-controlled mortgage giants Fannie Mae and Freddie Mac have brought similar suits against many of the banks.
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.
The FDIC asserted in its suit that the banks' misconduct in setting LIBOR caused “substantial losses” to the 10 U.S. banks that failed. The amount wasn't specified. The agency is seeking economic and punitive damages — to be determined by the court.
The other banks named in the suit are Switzerland's Credit Suisse, Germany's Deutsche Bank and Portigon, British banks HSBC and Lloyds, France's Societe Generale, Japan's Norinchukin Bank and Bank of Tokyo-Mitsubishi, and Royal Bank of Canada.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Top residential, commercial deals of the week — March 1
- Easier home loan rules worry some
- Severance tax on natural gas drilling backed by Pa. voters
- Few in Westmoreland County opposed to expansion plan for Mariner pipeline
- Toyota Mirai to run on hydrogen fuel cells, widen green-vehicle divide
- Real estate investors shy away from buying ‘deal’ homes
- Oilfield employee cutbacks may benefit long-haul trucking
- Mylan closes $5.3B tax-lowering deal with Abbott Labs