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The US Federal Deposit Insurance Corporation (FDIC) has sued 16 banks for allegedly manipulating the London interbank offered rate (LIBOR).
The LIBOR rate is used to set trillions of dollars of financial contracts, including mortgages and financial transactions around the world.
The regulator said the manipulation caused substantial losses to 38 US banks which were shut down during and after the 2008 financial crisis.
The sued banks include Barclays, HSBC, Citigroup and Royal Bank of Scotland.
The British Bankers’ Association (BBA) has also been sued by the FDIC.
“BBA participated in the alleged scheme to protect the revenue stream it generated from selling Libor licenses and to appease the Panel Bank Defendants that were members of the BBA,” it was quoted as saying by the AFP news agency.
The FDIC has sued 16 banks for allegedly manipulating the LIBOR
The FDIC alleged that the banks mentioned in its lawsuit rigged the rate from August 2007 to at least mid-2011.
Other banks named in the lawsuit include Bank of America, JPMorgan Chase, Deutsche Bank, Lloyds Bank, Credit Suisse, UBS, and Rabobank.
LIBOR is the average rate at which banks lend money to one another and is decided on a daily basis.
Most of the world’s biggest banks contribute estimates to form the LIBOR.
But there have been allegations that some have looked to profit from it by understating or overstating their submissions.
Over the past two years, regulators across the globe have been investigating the manipulation of the rate and there have been $3.7 billion in fines to date.
A string of international banks and brokers have faced both criminal and civil penalties for their involvement in the scandal.
Some banks have also been found to have understated their submissions in the period during and after the financial crisis.
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Royal Bank of Scotland (RBS) is expected to be fined a total of about £400 million ($625 million) by UK and US regulators as a result of the LIBOR scandal.
The head of RBS’s investment banking arm since 2008, John Hourican, is also expected to step down.
However, there is no suggestion he was involved in the scandal.
RBS is accused of colluding with other banks to rig LIBOR rates during the global financial crisis. Barclays and UBS have already received fines.
Business Secretary Vince Cable said the UK government had made it clear to RBS that the fines should be paid from staff bonuses, saying that neither taxpayers nor bank customers should bear the cost.
The government has an 81% stake in RBS following the part-nationalization of the bank during the financial crisis.
“The problem is that these are global banks and if they’ve committed breaches of the law in the US they have to be punished accordingly,” said Vince Cable.
“It is absolutely galling for UK taxpayers to be asked to stump up for it.”
But he acknowledged that the government could not force RBS to act, despite its majority stake.
RBS is expected to be fined a total of about $625 million by UK and US regulators as a result of the LIBOR scandal
In a statement released on Wednesday morning, RBS said it was still in “late-stage settlement discussions” with US and UK authorities over “potential settlements”.
“Although the settlements remain to be agreed, RBS expects they will include the payment of significant penalties as well as certain other sanctions,” the bank said.
Those discussions are taking place with the Financial Services Authority in the UK, the US Commodity Futures Trading Commission and the US Department of Justice.
The greater proportion of the fines are expected to be imposed by the US authorities.
Swiss bank UBS admitted to wire fraud charges against its Tokyo office as part of its £940m settlement with international regulators in December.
Barclays, the first bank to admit to its role in rigging LIBOR, paid a total of £290 million ($460 million).
John Hourican, who earned £3.5 million ($5.5 million) for last year’s work, is expected to lose his bonus for 2012 along with his position as head of RBS’s investment bank. He is also expected to forego £4 million ($6 million) of bonuses from previous years, in order to help pay the expected fines.
John Hourican is the highest profile casualty at the bank since it emerged last year that dozens of bankers had willfully manipulated the key interest rate.
LIBOR, a daily average of borrowing costs announced by a panel of London-based banks, is used to calculate payments on hundreds of trillions of dollars-worth of financial contracts.
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Credit ratings agency Moody’s has decided to downgrade 15 global banks and financial institutions.
In the US, Bank of America and Citigroup were among those marked down.
The UK banks downgraded were Royal Bank of Scotland, Barclays and HSBC. Lloyds also had its rating cut by Moody’s in a separate announcement.
The other institutions that have been downgraded are Goldman Sachs, Morgan Stanley, JP Morgan Chase, Credit Suisse, UBS, BNP Paribas, Credit Agricole, Societe Generale, Deutsche Bank and Royal Bank of Canada.
Moody’s added that it was putting some of the banks on a negative outlook, which is a warning that they could be downgraded again in the future.
Explaining this, it said governments around the world had shown a “clear intent” to reduce their support for banks going forward.
Credit ratings agency Moody's has decided to downgrade 15 global banks and financial institutions
In Friday trading, shares in Royal Bank of Scotland (RBS) were up 0.8%, HSBC had gained 0.6%, and Barclays had risen 0.5%. Lloyds was 1.6% higher.
In France and Germany, Societe Generale was up 2.1%, while shares in Deutsche Bank were flat.
In a statement, RBS responded to its downgrade saying: “The group disagrees with Moody’s ratings change, which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile.”
RBS estimated that the downgrade could mean it would need to find an extra £9bn in collateral for its debts.
Lloyds said it believed that the change would have “limited impact on our funding costs and market capacity”.
In the US, Citigroup said it “strongly disagrees” with Moody’s decision.
Of the banks downgraded, four were cut by one notch on Moody’s ranking scale, including HSBC, Royal Bank of Scotland, and also Lloyds.
A further 10 banks had their rating reduced by two notches, including Barclays. Credit Suisse was lowered by three notches.
Moody’s separates the 15 banks into three groupings, relative to its assessment of their resilience to any global financial market turmoil.
It puts HSBC in its strongest “first group”, together with Royal Bank of Canada and JP Morgan.
Moody’s says these banks have “stronger buffers” than many of their peers, and “generally more stable businesses”.
Barclays is in its “second group” of banks which Moody’s says faces “sometimes adverse factors”. Other banks at this level are BNP Paribas and Goldman Sachs.
RBS is in the bottom “third group”, which comprises banks which “have been affected by problems in risk management, or have a history of high volatility”. Other banks in this grouping include Bank of America and Citigroup.
A new technology that will enable people to withdraw money from cash machines (ATM’s) using their smartphone has been unveiled.
Customers who use the Royal Bank of Scotland (RBS) or NatWest mobile banking app can now request cash, up to £100 ($160), via their smartphone.
They are given a six-digit code to enter into an ATM to release the cash.
A similar system has been developed by cash machine operator NCR. This requires users to scan a barcode to withdraw the money.
The services are the latest developments in a long-predicted move towards the smartphone becoming a digital wallet.
Customers who use the Royal Bank of Scotland (RBS) or NatWest mobile banking app can now request cash, up to £100 ($160), via their smartphone
RBS said that its new system would help customers who had forgotten their bank cards, or who wished to send cash to family members in a hurry.
It would also allow the people to leave their wallets at home in favor of taking a mobile phone, it suggested.
“It is a really simple and secure way to help our customers get cash whenever and wherever they need it,” said Ben Green, head of mobile at RBS and NatWest.
The service is available to customers who have downloaded the bank’s free app and use the 8,000 RBS, NatWest or Tesco branded ATMs in the UK. Some 2.6 million people have installed it on their smartphone so far, the bank said.
At present, customers using a card can withdraw up to £300 ($480). Initially the limit on the cardless withdrawal will be £100 ($160).
Access to the app requires a password, and the withdrawal code will be hidden until the user taps the screen. This is aimed at preventing thieves from looking over the user’s shoulder to steal the code.
The system is an extension of a RBS service that allowed people whose card had been stolen to access emergency cash from an ATM.
The bank is also unveiling a system which allows customers to make charity donations at its ATMs.
In a separate development, NCR has announced that it has developed software that allows people to scan a barcode on their smartphone at an ATM to release an amount entered in their smartphone.
It is looking for banks and building societies to adopt the software.
