By Nate Raymond and Aruna Viswanatha
NEW YORK/WASHINGTON, March 14 The Federal
Deposit Insurance Corp sued 16 of the world's largest banks on
Friday, accusing them of cheating dozens of other now defunct
banks by manipulating the Libor interest rate.
The 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, the FDIC said.
Some of the banks accused in the lawsuit, including Barclays
Plc and UBS, have already paid some $6
billion to resolve charges from U.S. and European authorities
that they worked to manipulate benchmark interest rates.
They have also been sued by investors and others who claim
they lost money due to the manipulation. A federal judge last
March dismissed many of those claims that were based on
antitrust law, but has yet to rule on cases that rely on the
"breach of contract" theory used by the FDIC.
"These look very much like claims that I think are going to
have a much better chance with the court," said Daniel Brockett,
a lawyer with Quinn Emanuel Urquhart & Sullivan who had brought
other cases against banks over Libor manipulation.
A representative of the FDIC declined comment.
Representatives of the banks declined comment or did not respond
to a request for comment.
Libor, which is the average rate that a panel of banks say
they can borrow unsecured funds, has become a key rate globally,
underpinning more than $550 trillion in financial products, from
home loans to derivatives.
The financial institutions' conduct caused "substantial
losses" to 38 banks that the U.S. regulator had taken into
receivership since 2008, including Washington Mutual Bank and
IndyMac Bank, the FDIC said.
The regulator did not quantify the losses at issue. The
lawsuit also did not specify what damages the FDIC is seeking.
The lawsuit also accused the British Bankers' Association,
the U.K. trade organization that during the period at issue
administered Libor, of participating in the scheme.
The BBA had said it independently monitored the banks' Libor
submissions, and represented that Libor was a "transparent"
benchmark, even though it knew those statements were false, the
FDIC said. A representative of the BBA declined comment.
The banks named as defendants include Bank of America Corp
, Citigroup Inc, Credit Suisse Group AG,
Deutsche Bank AG, HSBC Holdings PLC,
JPMorgan Chase & Co, and Royal Bank of Scotland Group
Other defendants in the lawsuit are Rabobank, Lloyds Banking
Group plc, Societe Generale, Norinchukin Bank
, Royal Bank of Canada, Bank of
Tokyo-Mitsubishi UFJ and WestLB AG.
The case is Federal Deposit Insurance Corporation, et al, v.
Bank of America Corp, et al, U.S. District Court, Southern
District of New York, No. 14-1757.