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Berkshire Bank Sues Barclays, Citigroup Over Libor

Berkshire Bank Sues Barclays, Citigroup Over Alleged Libor Fraud
A pedestrias walks past a Berkshire Bank branch in New York on Monday. Photographer: Scott Eells/Bloomberg

Berkshire Bank, a New York lender with 11 branches, sued 21 banks including Bank of America Corp., Barclays Plc and Citigroup Inc. for damages over the alleged manipulation of the London interbank offered rate.

Berkshire sought undisclosed compensation and punitive damages and the right to represent other lenders in a group lawsuit, or class action, in a July 25 filing in federal court in Manhattan. The lender claims in the suit that Libor fraud lowered interest payments it received.

Libor is the most widely used benchmark for setting values on about $360 trillion in financial products, with the rate being fixed each morning by the British Bankers’ Association. Confidence in Libor has been shaken by Barclays’s admission that it submitted false rates. Robert Diamond, who resigned as London-based Barclays’s chief executive officer after the bank was fined 290 million pounds ($456 million), told British lawmakers this month that other banks also lowballed Libor submissions.

“Tens, if not hundreds, of billions of dollars of loans are originated or sold within this state each year with rates tied to USD Libor,” New York-based Berkshire Bank said in its complaint. The New York banks “were unable to collect the full measure of interest income to which they were entitled,” Berkshire said.

Berkshire seeks to represent all banks, savings-and-loan institutions and credit unions that are based in New York or have most of their operations in the state. There are several hundred such institutions, the bank said.

Japanese Banks

Defendants in the suit also include the Japanese companies Norinchukin Bank and Bank of Tokyo-Mitsubishi UFJ Ltd.

U.S. prosecutors are preparing to file charges later this year against traders from several banks involved in a bid-rigging scheme to manipulate Libor rates, according to a person familiar with the case, who asked not to be identified because the matter is confidential.

The Justice Department investigation of criminal activity related to Libor is moving on a parallel course with civil probes of the banks being conducted by the U.S. Commodity Futures Trading Commission, the Securities and Exchange Commission and U.K. regulators, including the Serious Fraud Office.

So far, almost 20 traders have been identified in regulatory filings, media reports or by the banks as having been under investigation. Another 14 traders were mentioned, but not identified by name, in the Barclays settlement.

The European Union promised stricter supervision of interbank lending rates and said on July 25 that it may expand antitrust probes of the manipulation.

The case is Berkshire Bank v. Bank of America Corp. 12-cv-5723. U.S. District Court, Southern District of New York (Manhattan).

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