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An Alaska pension fund sues banks over rate manipulation allegations
September 4, 2014 / 10:02 PM / 3 years ago

An Alaska pension fund sues banks over rate manipulation allegations

NEW YORK, Sept 4 (Reuters) - Thirteen of the world’s biggest banks have been accused by an Alaska pension fund of breaking U.S. antitrust and commodities laws by rigging an interest rate benchmark used to price many financial instruments in the $710 trillion derivatives market.

In a complaint filed on Thursday in U.S. District Court in Manhattan, the Alaska Electrical Pension Fund said the banks ran a “secret conspiracy” to set the “ISDAfix” rate at artificial levels from 2009 to 2012, causing billions of dollars of investor losses.

The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc , Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc, HSBC Holdings Plc , JPMorgan Chase & Co, Nomura Holdings Inc. , Royal Bank of Scotland Group Plc, UBS AG and Wells Fargo & Co.

Also named as a defendant was ICAP Plc, a British brokerage that in January lost its role as the administrator of U.S. dollar ISDAfix rates in the wake of U.S. and U.K. probes.

The banks either declined to comment or did not immediately respond to requests for comment. ICAP declined to comment, saying it had yet to be served with the complaint.

ISDAfix is used by companies and investors to price a variety of swaps transactions, commercial real estate mortgages and structured debt securities.

According to the complaint, the defendants rigged ISDAfix by executing rapid trades just before the rate was set, known as “banging the close”; causing ICAP to delay processing trades until the banks moved the rate where they wanted; and arranging for ICAP to post a rate that didn’t reflect market activity.

As a result of such activity, the defendants would submit “the same or virtually the same USD ISDAfix rate quotes on almost every single day, down to five decimal points,” the complaint said.

The odds were “astronomical” against this occurring by chance, and only when the probes began did the similar rate submissions stop, the lawsuit said.

Goldman, HSBC, Nomura, RBS and Wells Fargo by last September no longer had roles in setting ISDAfix, the complaint said.

The lawsuit was filed less than four hours after U.S. District Judge Denise Cote in Manhattan allowed other investors to pursue a lawsuit accusing 12 banks, most of which were also sued over ISDAfix, of fixing prices in the roughly $21 trillion credit default swaps market.

The case is Alaska Electrical Pension Fund v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 14-07126. (Reporting by Jonathan Stempel in New York; Editing by Grant McCool)

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