Banks implicated in the LIBOR rate rigging scandal continue to face legal and financial repercussions in the United States. LIBOR - or the London Interbank Offered Rate - represents the rate at which they could borrow money from other banks. The rate is computed daily and is used as the base for trillions of dollars of transactions around the world.

The LIBOR scandal broke when it came to light that banks were manipulating the LIBOR rate, enabling them to make bns of dollars in profits and to appear more credit-worthy than perhaps they actually were. Since then, two banks (Barclays PLC and UBS AG) have agreed to settle with government authorities for $450 m and $1.5 bn, respectively; Royal Bank of Scotland Group is expected to settle with government authorities within the next few weeks for at least $500 m. The UK part of the Barclays and UBS settlements are covered in some detail elsewhere in Enforcement Watch ("27 June 2012: Barclays receives largest ever fine imposed by the FSA" and this issue "19 December 2012: UBS receives largest ever FSA fine").

Notwithstanding governmental investigations, banks are also facing legal action by states, cities, public entities, and individuals in relation to LIBOR rigging. At present, there are approximately 30 lawsuits involving LIBOR manipulation being coordinated by a federal judge in New York, along with a class-action lawsuit filed in New York federal court in October. Recently, another eight lawsuits were filed in California federal court on behalf of California municipalities and public entities against twenty banks, including Bank of America, Barclays Bank PLC, Citigroup, Deutsche Bank AG, HSBC, JP Morgan Chase & Co., and UBS AG. It is expected that these lawsuits will be transferred to New York federal court for at least the pre-trial stage. More information can be found here, here and here.

Comment

The size of the LIBOR scandal may well end up being the largest financial scandal in history. More than two dozen banks are facing legal action in more than three dozen lawsuits in the United States alone. Nearly two bn dollars have already been paid to settle charges in the US - and that is only from the first two banks to settle with U.S. government authorities. What the cases go to show is that the fallout from regulatory wrongdoing is not limited to actions by the regulators. Investors can and do take cases on the back of them, and we expect the fallout from this scandal to continue vigorously throughout 2013; it would not be surprising to see the total amount of money paid out through settlements and judgments at least to double or triple what has already been paid. The scandal still has a significant way yet to run.