The US has taken the unusual step of suing European banks in a London court over the Libor-rigging scandal after parts of a similar New York lawsuit failed.
The Federal Deposit Insurance Corporation, which is in charge of winding down failing banks, is suing Barclays, Deutsche Bank, Lloyds Banking Group, Royal Bank of Scotland, Rabobank and UBS, as well as the British Bankers’ Association, the trade group that oversaw the Libor-setting process, for fraudulent misrepresentation. It claims the banks submitted artificially low estimates to the Libor rate-setting process between 2007 and 2009 — known as “lowballing” — making them seem more creditworthy than they really were.
The FDIC said in court documents filed at the High Court last month that it was suing on behalf of 39 failed US banks that relied on dollar-denominated Libor when they entered into derivative transactions or calculated interest, and that they “suffered loss as a result,” according to the documents seen by the Financial Times.