Bloomberg News

JPMorgan Chase, 12 More Banks Face Regulator’s Libor Suit (1)

September 24, 2013

JPMorgan Chase & Co. (JPM:US), Barclays Plc (BARC), Credit Suisse Group AG (CSGN) and 10 other international lenders were sued by a U.S. credit union regulator alleging they illegally manipulated benchmark Libor interest rates.

The National Credit Union Administration, an Alexandria, Virginia-based regulator, sued the banks yesterday at a U.S. court in Kansas.

Libor, the London interbank offered rate, is a key metric to set interest rates for trillions of dollars in financial instruments.

Their alleged manipulation “resulted in a loss of income from investments and other assets held by five failed corporate credit unions: U.S. Central, WesCorp, Members United, Southwest and Constitution,” according to an NCUA statement yesterday.

The banks are accused of giving false information in response to a daily survey by the British Bankers’ Association, which asks lenders how much it would cost to borrow money from each other for various intervals in 10 different currencies.

Borrowing Costs

The misinformation allowed them to “benefit their investments that were tied to Libor, to reduce their borrowing costs, to deceive the marketplace as to the true state of their creditworthiness, and to deprive investors of the interest rate payments to which they were entitled,” according to the NCUA.

Kerrie Ann Cohen, a New York-based spokeswoman for Barclays, declined to comment on the allegations.

Brian Marchiony, a spokesman New York-based JPMorgan and Drew Benson, a spokesman for Credit Suisse, also declined to comment.

Also named as a defendant in the complaint is Royal Bank of Canada, that nation’s biggest lender by assets. Rina Cortese, a spokeswoman for the Toronto-based bank, in an e-mailed message declined to comment on the NCUA’s allegations.

The regulator yesterday also sued Goldman Sachs & Co., Morgan Stanley and seven other financial institutions in federal court in New York over their sale of $2.4 billion in mortgage-backed securities to two credit unions that later failed.

Later Liquidated

“NCUA’s suits allege the firms made misrepresentations in connection with the underwriting and subsequent sale of the mortgage-backed securities,” the agency said yesterday in a statement. “The corporate credit unions became insolvent, were subsequently placed into NCUA conservatorship and later liquidated as a result of losses from these faulty securities.”

Tiffany Galvin, a spokeswoman for Goldman Sachs, declined to comment on those allegations. Mary Claire Delaney, a spokeswoman for Morgan Stanley (MS:US), declined to comment. Both firms are based in New York.

“Any recoveries from this legal action will reduce the total losses resulting from the failure of the credit unions,” NCUA attorneys said in their Morgan Stanley complaint.

NCUA sued the broker last month in a Kansas federal court over its alleged sale of $566 million in residential mortgage-backed securities to two other failed credit unions.

The Libor case is National Credit Union Administration Board v. Credit Suisse Group AG, 13-cv-02497, U.S. District Court, District of Kansas (Kansas City).

The Goldman case is National Credit Union Administration Board v. Goldman Sachs & Co., 13-cv-06721, U.S. District Court, Southern District of New York (Manhattan). The Morgan Stanley case is National Credit Union Administration Board v. Morgan Stanley & Co., 13-cv-06705, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $59.01 USD
    • -0.16
    • -0.27%
  • MS
    (Morgan Stanley)
    • $33.24 USD
    • -0.16
    • -0.48%
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