More than a dozen banks including Citigroup Inc. (C:US) and Bank of America Corp. (BAC:US) asked a U.S. judge to dismiss a group of lawsuits in which they are accused of trying to manipulate the London interbank offered rate.
Plaintiffs including the City of Baltimore and New Britain Firefighters’ Benefit Fund sued the banks in 2011, contending they “suppressed” the Libor -- a key metric to set interest rates for trillions of dollars in financial instruments.
More than 20 cases have been aggregated before U.S. District Judge Naomi Reice Buchwald in New York. In some suits, the lenders are accused of antitrust violations, in others currency traders allege the manipulation injured investment returns.
The allegations “undermine, rather than support, the conclusion that a conspiracy to suppress” the Libor existed, lawyers for UBS AG (UBSN) wrote in court papers filed with Buchwald on June 30. The antitrust complaints “implicitly acknowledge that defendants regularly enter into contracts in which they will benefit from higher interest rates,” the lender said.
Libor fixes the interest rates under which banks lend money to one another for as little as a day and as long as a year. Rates for 10 different currencies including the U.S. dollar, Japanese yen and British pound are computed daily after canvassing banks that comprise membership panels for each type of money.
Last week, Britain’s second-biggest bank, Barclays Plc (BARC), agreed to pay U.S. and U.K. regulators 290 million pounds ($455 million) in fines for attempting to manipulate those rates, which are relied upon to fix interest in transactions worth trillions of dollars.
Under a two-year non-prosecution agreement with the U.S. Justice Department, Barclays agreed to cooperate in the international probe.
Some of the New York plaintiffs claim an analysis by outside consultants found Libor suppression in 2007 and 2008, allowed banks to mask their level of risk during a period of financial crisis.
“I think this is a case that will survive a motion to dismiss,” attorney Jeffrey Shinder, managing partner in the New York office of Constantine Cannon LLP, said today in a telephone interview about the antitrust claims. No one lender has the ability to influence Libor, he said.
“They could not have accomplished what they’re doing without the collusion of other banks,” said Shinder, who isn’t involved in the case. “Clearly collusion was going on. Clearly.”
The consolidated case is In re Libor-Based Financial Instruments Antitrust Litigation, 11-MD-2262, Southern District of New York (Manhattan).
To contact the reporters on this story: Phil Milford in Wilmington, Delaware at email@example.com; Andrew Harris in Chicago at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Hytha at email@example.com