Bank of America Corp, Citigroup Inc and Credit Suisse Group AG were among 16 of the world’s biggest banks sued by the US Federal Deposit Insurance Corp (FDIC) for allegedly manipulating the London interbank offered rate from 2007 to 2011.
The FDIC, acting as receiver for 38 failed banks including Washington Mutual Bank, IndyMac Bank FSB and Colonial Bank, claimed that institutions sitting on the US dollar LIBOR panel “fraudulently and collusively suppressed” the rate. Also named in the suit, filed on Friday in the Manhattan federal court, is the British Bankers Association, an industry group that oversaw LIBOR.
Regulators around the world have been probing whether firms colluded to manipulate interest-rate benchmarks including LIBOR, which affects more than US$300 trillion of securities worldwide. Financial institutions have paid about US$6 billion so far to resolve criminal and civil claims in the US and Europe that they manipulated benchmark interest rates.
The cost for global investment banks could climb to US$46 billion, analysts at KBW, a unit of Stifel Financial Corp, said in a report last year. JPMorgan Chase & Co and HSBC Holdings PLC may face an EU complaint as soon as next month from the bloc’s antitrust chief.
The failed banks “reasonably expected that accurate representations of competitive market forces, and not fraudulent conduct or collusion,” would determine the benchmark, the FDIC said in its complaint.
Barclays PLC, Rabobank, UBS AG and Royal Bank of Scotland PLC have resolved LIBOR-related investigations.
Investigators claim the banks altered submissions used to set the benchmark to profit from bets on interest-rate derivatives or to make the lenders’ finances appear healthier than they were.
In addition to Bank of America, Citigroup and Credit Suisse, the banks sued yesterday are JPMorgan Chase, HSBC, Barclays, Rabobank, UBS, Royal Bank of Scotland, Deutsche Bank AG, Lloyds Banking Group PLC, Societe Generale SA, Norinchukin Bank, Royal Bank of Canada, Bank of Tokyo-Mitsubishi UFJ Ltd and WestLB AG.
In its complaint, the FDIC claimed the fixed rates caused the failed banks to pay higher prices for LIBOR-based financial products and to get lower interest payments from the defendants and others.
Many of the failed banks sought out LIBOR-based derivatives as protections, not to seek capital gains, said Robert DeYoung, a University of Kansas professor who is a research fellow at the FDIC.
“There’s an awful lot of proof that the FDIC has to come up with to make their case,” DeYoung said.
The FDIC, which insures bank deposits, has previously sued big, global banks for misrepresenting securities based on mortgages and harming banks that went on to fail.
The suit filed on Friday is “very consistent with the cases they’ve brought on mortgage-backed securities,” said Michael Krimminger, a former FDIC general counsel who represents banks at Cleary Gottlieb Steen & Hamilton LLP in Washington. The difference is in the complexity of proving harm, raising “much more difficult questions of proof for the FDIC,” he said.
The FDIC claims breach of contract on behalf of 10 of the failed banks, including Washington Mutual and IndyMac, which entered into LIBOR-based interest-rate swap contracts with banks that are named as defendants.
The FDIC alleges the banks committed fraud and violated US antitrust laws in fixing the US dollar LIBOR benchmark. It is seeking unspecified damages on behalf of the failed banks, including punitive damages and triple damages for price-fixing.
RECORD BUDGET: TSMC does plan to raise its proposed capital expenditure a lot, and could benefit if Intel outsources more of its production to foundries, analysts said Intel Corp’s earnings conference call on Thursday is expected to clarify the US semiconductor giant’s outsourcing production plans, which would be crucial regarding Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) performance, analysts said. “TSMC stands to benefit if Intel outsources more of its fabrication to foundries,” SinoPac Securities Investment Service Corp (永豐投顧) analysts said in a note on Friday. Yuanta Securities Investment Consulting Co (元大投顧) was more cautious, saying that Intel’s contribution initially would be limited, but its outsourcing plans would still highlight TSMC’s leadership in technology, it added. “Intel will continue to manufacture server or high-end central processing units [CPUs], which have higher
Norway’s oil and gas reserves have made it one of the world’s wealthiest countries, but its dreams for deep-sea discovery now center on something different. This time, Oslo is looking for a leading role in mining copper, zinc and other metals found on the seabed and in hot demand in green technologies. The country could license companies for deep-sea mining as early as 2023, the Norwegian Ministry of Petroleum and Energy said, potentially placing it among the first countries to harvest seabed metals for electric vehicle batteries, wind turbines and solar farms. However, that could also place it on the front line of
‘BROAD RANGE’: The US Department of Commerce intends to deny a significant number of license requests for exports to Huawei, an industry association said US President Donald Trump’s administration notified Huawei Technologies Co (華為) suppliers, including chipmaker Intel Corp, that it is revoking certain licenses to sell to the Chinese company and intends to reject dozens of other applications to supply the telecommunications firm, people familiar with the matter told reporters. The action — likely the last against Huawei under Trump — is the latest in a long-running effort to weaken the world’s largest telecommunications equipment maker, which Washington sees as a national security threat. The notices came amid a flurry of US efforts against China in the final days of Trump’s administration. US president-elect Joe
MOBILE SMART: The Dimensity 1200 is 22 percent better in terms of performance than its predecessor, and 25 percent more power-efficient, the handset chip designer said MediaTek Inc (聯發科) yesterday unveiled its premium 5G processors — the Dimensity 1200 and Dimensity 1100 — as it vies for a larger slice of the world’s rapidly growing 5G smartphone market. Manufactured using Taiwan Semiconductor Manufacturing Co’s (台積電) 6-nanometer process technology, the Dimensity 1200 processor performs 22 percent better than the previous generation Dimensity 1000+ processor, and is 25 percent more power-efficient, MediaTek said. Chinese smartphone brands Xiaomi Corp (小米) and Realme Mobile Telecommunications (Shenzhen) Co (銳爾覓移動通信) are to be the first adopters of the latest Dimensity chips, the companies said during a virtual media briefing. Xiaomi plans to equip its first