FDIC sues BofA, others over interest rate rigging
03/14/2014 7:01 PM
03/14/2014 7:02 PM
Bank of America is among major U.S. and international banks being accused by the Federal Deposit Insurance Corp. of fraud in the manipulation of the global interest rate commonly referred to as Libor.
The civil lawsuit, filed Friday in New York, also names as a defendant Bank of America’s Merrill Lynch unit. Citigroup and JPMorgan Chase & Co. are among other defendants.
Libor, or the London interbank offered rate, is an interest rate that banks pay to borrow money from one another in the London interbank market. The FDIC, which is seeking a jury trial, says the banks “fraudulently and collusively” suppressed the U.S. rate from 2007 to at least mid-2011.
The banks, the lawsuit says, manipulated Libor in secret and “for their gain and to the detriment of others in the financial markets.”
The FDIC is seeking to recover losses it claims other now-defunct banks suffered as a result of the alleged rate manipulation. The suit does not mention the specific damages being sought.
A Bank of America spokesman declined to comment on the lawsuit. An FDIC spokesman also declined to comment.
The lawsuit also names as a defendant the British Bankers’ Association. The FDIC said the association participated in the scheme in order to protect the revenue stream it generated from selling Libor licenses.
It’s the latest legal headache for Charlotte-based Bank of America, which has paid more than $50 billion in litigation costs since the financial crisis. Many of the costs resulted from legal issues stemming from Countrywide Financial Corp., which the bank bought in 2008.
Friday’s lawsuit comes a year after a federal judge in New York dismissed many claims against Bank of America and other major banks accused of rigging Libor.
That ruling affected various litigation involving Libor, including lawsuits filed by Freddie Mac and municipalities, such as Baltimore. The judge has yet to issue a ruling on the remaining claims.
In October, Fannie Mae also sued Bank of America and other major banks alleging Libor rigging. That litigation is pending.
Last month, Bank of America said it has increased its estimate of potential litigation-related losses to $6.1 billion, an increase of $1 billion over its previous estimate. The losses would be beyond what the bank puts into its legal reserves to cover litigation-related costs.
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