NEW YORK A European asset manager has sued one dozen U.S., European and Japanese banks, accusing them of conspiring to manipulate Libor, a benchmark used to set interest rates on hundreds of trillions of dollars of securities.
Vienna-based FTC Capital GmbH and two funds it operates in Luxembourg and Gibraltar accused the banks of conspiring to artificially depress Libor, and limit trade in Libor-based derivatives from 2006 to 2009.
The defendant banks include Bank of America Corp, Barclays Plc, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co, Lloyds Banking Group Plc, Norinchukin Bank, Royal Bank of Scotland Group Plc, UBS AG and WestLB AG.
Libor, whose full name is the London Interbank Offered Rate, is a measure for rates that banks charge each other, and is used worldwide as a short-term rate benchmark.
About $350 trillion (214.59 trillion pounds) of derivatives and other financial products are based on Libor. Small changes in the rate can have large impacts on the amounts of interest that can be charged.
FTC said the 12 banks colluded to suppress Libor to make them appear healthier than they were, and take advantage of trading opportunities not available to outside investors.
"During the most significant financial crisis since the Great Depression, U.S. dollar Libor rates submitted by contributor banks did not vary markedly, nor did they increase or decrease sharply," FTC said in its complaint filed Monday in the federal court in Manhattan.
"In a market not artificially suppressed, Libor rates should have increased significantly during this period," FTC added. "In addition, because different banks were experiencing different levels of severe stress, the banks should have been receiving markedly different borrowing rates."
Citigroup spokeswoman Danielle Romero-Apsilos said: "The lawsuit is without merit." Bank of America spokesman Lawrence Grayson, Credit Suisse spokesman Steven Vames, JPMorgan spokeswoman Jennifer Zuccarelli and Lloyds spokeswoman Sarah Swailes declined to comment.
Representatives of the remaining banks declined to make an immediate comment or could not immediately be reached for a comment.
U.S., British and Japanese regulators are examining whether major banks understated Libor to reduce their borrowing costs and the potential for investor panic, a person familiar with the matter said last month.
The case is FTC Capital GmbH et al v. Credit Suisse Group AG et al, U.S. District Court, Southern District of New York, No. 11-02613.
(Reporting by Jonathan Stempel in New York, editing by Maureen Bavdek)