US FIDC Sues 16 Banks for Rigging Libor Rates

The US Federal Deposit Insurance Corp. (FDIC) has filed charges against 16 banks, which set key global interest rates, for fraud and conspiracy for keeping low rates to enrich themselves, according to reports.

Al Jazeera.net reported Saturday the US FIDC sued among the world’s largest banks that include Bank of America, Citigroup and JPMorgan Chase. The civil lawsuit was filed on Friday in Manhattan federal court.

Report said the FIDC is seeking recovery from losses suffered from rate manipulation allegedly done by 10 US banks that failed during the financial crisis and were taken over by the agency.

The FIDC, according to the report, alleged that the banks rigged the London interbank offered rate, or Libor, from August 2007 to at least mid-2011. The Libor affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.

Reports said 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, report said.

The FIDC said has alleged in the suit that 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.”

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

$3.6bn to Settle Charges

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, report said. They signed agreements with the US Justice Department that allow them to avoid criminal prosecution if they meet certain conditions.

Take Over

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

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

Source: Al Jazeera.net

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