NEW YORK/WASHINGTON: The US Federal Deposit Insurance Corp. sued 16 of the world’s largest banks, 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 US 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 US 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 UK trade organization that during the period at issue administered Libor, of participating in the scheme.