In the UK, the US government is suing several banks over Libor rigging allegations in High Court. The defendants in the London Interbank Offered Rate (Libor) manipulation lawsuit include Deutsche Bank (DB), Barclays (BARC), Royal Bank of Scotland (RBS), Lloyds Banking Group, UBS (UBS), Rabobank (RABO), and several other banks, in addition to the British Bankers Association.
According to the Federal Deposit Insurance Corporation’s claim, the banks would engage in lowballing by turning in estimates that were artificially low when participating in the daily process to set the Libor rate. The US agency said that it is suing for 39 US banks, which were once collectively valued at over $400M, that failed after they depended on the US dollar denominated-Libor variant for derivative and other transactions. FDIC contends that the inaccurate figures submitted by the European banks caused the US banks to sustain massive losses.
It believes that if the Libor rate had been set honestly, the benchmark’s rate would would have been higher and these banks would have achieved higher prices and larger returns on different mortgages, loans, options, swaps, and other Libor-tied agreements. Instead, the plaintiffs allegedly colluded together to keep borrowing rates down to make it appear as if the banks were in more robust financial health than what was actual. The FDIC argued that the joint efforts of the banks and the British Bankers Association resulted in the “sustained and material suppression of Libor” from August 2007 through at least 2009.
The agency is not the only one to file Libor claims alleging manipulation against some of these banks. It is, however, the one focused on the banks’ alleged lowballing of Libor estimates, as well as claims that the defendants and the BBA were aware that they were engaged in business dealings tied to manipulated rates and they benefited as a result.
In its filing, the FDIC accused each bank defendant of having a monetary incentive to lowball the US dollar Libor. It noted that a USD Libor that was made lower than what it really was allowed the defendants involved to make more money because borrowing costs were reduced.
Ex-Société Générale Bankers Face Criminal Charges Over Libor Rigging
In other Libor related news, in the US, two former Société Générale SA (GLE) bankers have been indicted on allegations that they rigged the benchmark interest rate. Muriel Bescond and Danielle Sindzingre are accused of directing those reporting to them to turn in figures that were low and inaccurate to help calculate Libor between May 2010 and October 2011. Prosecutors believe that this led to over $170M in damages to global financial markets. They are charged with conspiring to turn in false reports about market information that would likely impact a commodity, as well as multiple counts of submitting false reports.
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US government files $400bn Libor case lawsuit in London court, International Business Times, August 18, 2017
Societe Generale Bankers Charged in U.S With Libor Rigging, Bloomberg, August 24, 2017