Libor Fixing Scandal: Fannie Mae Files $800m Lawsuit Against Barclays, RBS and Seven Others for Swaps Losses

Barclays, the Royal Bank of Scotland, Rabobank, and UBS are included in the nine banks being sued for $800m by Fannie Mae for the manipulation of key interbank lending rate Libor.

The US mortgage provider has alleged that it lost money on a range of financial products as a result.

In documents filed to the US District Court in Manhattan, the government controlled mortgage lender claimed that the nine banks conspired to rig rates for many years, which led to Fannie Mae losing money on swaps, mortgages, mortgage securities, and other transactions.

Libor valuations directly influence the value of trillions of dollars of financial deals between banks and other institutions.

The benchmark reference rates are used in euro, US dollar and British sterling over-the-counter (OTC) interest rate derivatives contracts and exchange traded interest rate contracts.

The 71-page lawsuit said that the "defendants' promises and representations regarding the legitimacy of Libor were false," and therefore caused Fannie Mae to lose lots of money on a number of financial products.

Barclays, Rabobank, RBS and UBS have each settled with a number of authorities around the world for a total of $3.6bn (£2.2bn, €2.7bn) and admitted to wrongdoing.

The Bank of America, Citigroup, Credit Suisse, Deutsche Bank and JPMorgan are also named in the lawsuit, but have not settled with authorities on any cases related to Libor fixing.

A Rabobank spokesperson told IBTimes UK that it "believes the lawsuits filed against it are without merit. Rabobank intends to continue to defend vigorously against these lawsuits."

Bank of America, UBS and Credit Suisse declined to comment.

All the other banks were not immediately available at the time of publication.

Mounting Fines

Barclays was the first to settle with UK and US authorities in June 2012 for £290m.

Nearly six months later UBS agreed a record $1.5bn fine with US, UK and Swiss authorities and also admitted to one count of wire fraud relating to rigging rates in Yen.

In February 2013, RBS became the third major bank to settle with regulators while its subsidiary, RBS Securities Japan Limited, also pleaded guilty to one criminal charge of wire fraud.

In September this year, Icap was ordered to pay £55m to US and UK authorities after a significant number of brokers, including two managers, attempted to rig rates between October 2006 and November 2010.

This week, Rabobank was fined €774m by global regulators and its chairman and CEi Piet Moerland stepped down early, ahead of his retirement.

On 29 October, Deutsche Bank revealed that its balance sheet was hit by billions of euros of litigation costs which subsequently led the German lender to report a near 100% drop in profits.

Meanwhile, UBS followed in Deutsche Bank's footsteps and said it has deferred a key earnings target by a year because of temporary demands to hold extra capital to deal with unresolved legal issues.