#Philadelphia Sues Big Banks, Alleging Antitrust Violations By Saranac Hale Spencer The Legal Intelligencer | July 29, 2013 Manipulation of the index used to calculate the interest rate paid by big banks to municipal bond issuers on interest-rate swaps led to sizable losses for Philadelphia and other government entities across the country, the city alleged in a complaint filed in the Eastern District of Pennsylvania. The suit — filed against Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, JPMorgan Chase, Royal Bank of Canada, Royal Bank of Scotland and UBS — alleges that the banks colluded in order to suppress the London Interbank Offered Rate, which is an index frequently used to set the floating interest rate in the once popular “fixed-to-floating rate agreements” that banks marketed to municipal entities. The London Interbank Offered Rate is more often called Libor. “Defendants in this case worked together to suppress Libor, which had the immediate effect of raising the amount paid by the municipal party. This is because, when the banks suppressed Libor, their obligation under the floating-rate arm of the swap was reduced, and thus the net amount the state or local counterparty had to pay increased,” according to the complaint from the city of Philadelphia. “This conduct is nothing short of naked price-fixing,” it said. In the last 20 years, the interest-rate swap system has operated on hundreds of trillions of dollars’ worth of state and local bonds, according to the complaint.
Posted on: Tue, 30 Jul 2013 02:04:02 +0000
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