Pension funds in class action over banks’ LIBOR price fixing

US institutional investors in potential multi-billion dollar case

It’s emerged that two US pension funds are among the plaintiffs in class action suits alleging that some of the world’s major banks rigged the key Libor rate prior to and during the financial crisis.

Libor is the daily reference rate at which banks borrow from each other in the London wholesale lending market. It acts as a benchmark for short-term interest rates globally.

The US pension funds, the City of Dania Beach Police & Firefighters’ Retirement System and the Carpenters Pension Fund of West Virginia are taking action alongside other investors in a total of 18 legal suits against banks including Credit Suisse, Bank of America, Citi, Deutsche Bank, HBOS, Lloyds, the Royal Bank of Canada, Société Générale and UBS.

Their legal filings claim that the banks colluded on fixing Libor as the crisis developed. Legal commentator Alison Frankel said the litigation “could be worth billions, although we’re a long, long way from there”. The plaintiffs are claiming damages under US federal antitrust laws and the Commodities Exchange Act.The two pension funds are specifically taking action against Bank of America in the Southern District of New York. There are currently moves to get the various legal actions consolidated.

A suit brought by Vienna-based training firm FTC, for example, cites the banks’ “unlawful and intentional misreporting and manipulation of – as well as their combination, agreement and conspiracy to fix” Libor prices.

From 2006 to 2009, it alleges, the defendants “individually artificially suppressed, and collectively agreed to artificially suppress, the Libor rate”.

The legal moves follow an analysis from the Wall Street Journal in 2008 that first raised the issue of Libor price-fixing.

Swiss banking giant UBS disclosed in its annual report in March that it had received subpoenas from the Securities and Exchange Commission, the Commodities Futures Trading Commission and the Department of Justice. It has since emerged that Bank of America, Citi and Barclays have all received subpoenas.