Libor Scandal Cause Corporate Losses: NCUA
The NCUA filed an antitrust lawsuit Sept. 23 against 13 international banks involved in the Libor rate scandal.
The manipulation of Libor in 2007 and 2008 resulted in a loss of investment income at the five failed corporate credit unions, because they invested in Libor-indexed assets such as floating-rate securities and fixed-rate bonds with attached interest rate swaps.
Bank employees reported artificially low rates, which resulted in underpayment on the assets.
The suit was filed in federal court in Kansas, where the failed U.S. Central Federal Credit Union was located. The NCUA said Western Corporate Federal Credit Union, Members United Federal Credit Union, Southwest Corporate Federal Credit Union and Constitution Corporate Federal Credit Union also suffered losses as a result of the scheme.
“Some firms were manipulating international interest rates in a way that cost the five corporates to lose millions of dollars. Just as we are doing in our other suits, we are seeking to hold responsible parties accountable for their actions,” NCUA Board Chairman Debbie Matz said.
The NCUA claims the bank defendants individually and collectively gave false information to benefit their investments that were tied to Libor, reduce their borrowing costs, deceive the marketplace as to the true state of their creditworthiness and deprive investors of interest rate payments.
In addition to the lawsuits, banks involved in scheme have been under investigation by authorities in the United States and the United Kingdom.
The investigating authorities have so far collected approximately $2.5 billion in penalties from three firms: UBS, the Royal Bank of Scotland and Barclays. More than 40 suits altogether have been filed.
The NCUA said it would apply any proceeds from the suit toward the corporate stabilization fund.