US Appeals Court revives Libor rigging claims against big banks

In a significant development a U.S. appeals court has revived a litigation wherein large banks had been accused of conspiring to rig the Libor interest rate benchmark, including during the 2008 financial crisis, to boost their profits at investors’ expense and make the balance sheet of banks look healthier than they were.

The 2nd U.S. Circuit Court of Appeals in Manhattan said, a lower court judge had jurisdiction over antitrust claims by investors including Charles Schwab Corp that bought various Libor-based products from the banks, or bought Libor-based futures on the Chicago Mercantile Exchange.

Without going into the merits of the allegations, Circuit Judge Richard Sullivan said accusations that bank executives and managers in the United States were ordering the suppression of Libor provided sufficient jurisdiction under a conspiracy-based theory of liability.

The appeals court adopted that theory after U.S. District Judge Naomi Reice Buchwald in Manhattan had dismissed investor claims in 23 separate cases from the litigation that dates back to the 2008-2009 financial crisis.

The appeals court’s 43-page ruling revived many of those claims, and it returned those cases to Buchwald for further proceedings.

The defendant banks, including HSBC, Bank of America, JPMorgan Chase, Bank of Tokyo-Mitsubishi UFJ, Credit Suisse, Barclays, Citigroup, Lloyds Banking Group, Deutsche Bank, Rabobank, NatWest, Societe Generale, Norinchukin Bank, WestLB, UBS and Royal Bank of Canada, sat on a panel involved in setting Libor.

Lawyers representing the banks and the investors during oral arguments, did not immediately respond to requests for comment.

Libor, or the London Interbank Offered Rate, has underpinned hundreds of trillions of dollars of transactions, including $265 trillion at the start of 2021.

Libor is used to set interest rates on things including credit cards, mortgages, and student loans.

From January 1, 2022 the benchmark is being scrapped following the rigging which has led to imposing fines on several banks.

It will be replaced by alternative rates, preferably those recommended by several banks and based on actual transactions.

The case is In re Libor-Based Financial Instruments Antitrust Litigation, 2nd U.S. Circuit Court of Appeals, Nos. 17-1569, 17-1915, 17-1989, 17-2056, 17-2343, 17-2347, 17-2351, 17-2352, 17-2360, 17-2376, 17-2381, 17-2383 and 17-2413.

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