March 17, 2014

FDIC sues 16 megabanks over Libor

March 18, 2014 – FDIC has filed suit against 16 of the largest banks in the world, including Bank of America and Citigroup, in response to their alleged manipulation of the London interbank offered rate, or Libor.

According to Bloomberg Businessweek, FDIC filed suit in Manhattan federal court last week in its role as receiver for 38 banks that failed as a result of the Libor scandal, including Washington Mutual Bank and Colonial Bank. The agency alleged that the 16 defendants, which also include Credit Suisse Group AG and the British Bankers Association, "fraudulently and collusively suppressed" the Libor between 2007 and 2011 when they sat on the U.S. dollar Libor panel. The agency says this rate manipulation caused the 38 banks to pay more for Libor-based financial products and receive lower interest rate payments from the 16 defendants and others.

In September, NCUA announced it would pursue recoveries from banks and other firms in the U.S. and around the world for their part in Libor manipulation and the sale of mortgage-backed securities that helped bring down five corporate credit unions – U.S. Central, WesCorp, Members United, Southwest and Constitution. The agency filed a suit against 13 international banks, as well as an additional nine lawsuits against Morgan Stanley & Co. Inc. and eight others over the sale of nearly $2.4 billion in mortgage-backed securities to Southwest and Members United.

NAFCU has encouraged NCUA to pursue all means available to mitigate the impact of corporate stabilization on federally insured credit unions.