Banks Sued by U.S. Homeowners Over Rigging of Libor Benchmark

The following article is brought to you by Neil Callanan at BusinessWeek.Com.

U.S. homeowners filed a lawsuit against 12 banks, including Barclays Bank Plc and JPMorgan Chase & Co. (JPM), claiming that manipulation of the benchmark Libor lending rate made their mortgage repayments more expensive.

Traders at banks in Europe and North America such as UBS AG (UBSN), Bank of America Corp. (BAC) and Royal Bank of Scotland Group Plc (RBS), “unjustly enriched themselves” by manipulating the rate, according to the complaint. That allowed them to increase the payments by homeowners on adjustable rate loans, boosting profit, according to the lawsuit.

Libor, or the London interbank offered rate, is the benchmark for more than $300 trillion of securities and loans. The rate is calculated from a daily poll carried out by Thomson Reuters Corp. on behalf of the British Bankers’ Association, a London-based lobby group. Lenders are asked to estimate how much it would cost to borrow from each other for different periods and in different currencies.

The other banks being sued in the U.S. District Court in New York are Citigroup Inc. (C), Rabobank International Holdings BV,Credit Suisse Group AG (CS), HSBC Holdings Plc (HSBA), Lloyds Banking Group Plc (LLOY), Deutsche Bank AG and Royal Bank of Canada (RY), according to the filing.

The plaintiffs asked for class-action status, a jury trial, cash compensation and an order permanently blocking the banks from rigging Libor. Class-action status allows plaintiffs more leverage in negotiations with defendants. Lead plaintiffs direct the litigation on behalf of the group, determining strategy while usually reaping the largest share of any verdict or settlement.

Barclays Plc (BARC), Britain’s second-biggest lender by assets, is the only bank to have settled with regulators over the rigging of Libor. The London-based company paid a record 290 million pound ($469 million) fine in June. Chief Executive Officer Robert Diamond and Chairman Marcus Agius resigned in the aftermath.

It is the first lawsuit filed by homeowners, the Financial Times reported earlier today without saying where it got the information. The five lead plaintiffs include Annie Bell Adams, a pensioner whose home was repossessed, the FT reported.

The case is Adams et al. v. Bank of America Corp. (BAC) et al., 12-cv-07461, U.S. District Court for the Southern District of New York (Manhattan).

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