RBS hit with fresh US lawsuit

The FDIC claims that the conduct of the UK banks skewed Libor against the banks it had to rescue during the financial crisis, meaning the claim has the potential to become the largest Libor-related lawsuit yet.

The US agency has brought the claim against nine banks at the High Court, in which it alleges that the banks, which also includes Barclays, colluded to hold down borrowing rates through the Libor mechanism for several years, a practice known as “lowballing”, to give the market a false idea of their financial health.

According to The Times newspaper, a figure has not been put on the claim, but 39 defunct banks that the agency rescued during the crisis had been worth more than $440bn with a combined turnover of $114bn at the end of 2007.

The failed banks all had a variety of assets that derived their prices from the benchmark at the time of their demise, according to the lawsuit.

The filing cites a 2008 memo from the BBA stating that USD Libor was 20 to 30bps lower than it should have been and lenders might “float the dollar rate slightly, gently, up” via a “co-ordinated action”.

Only last month, still 73 per cent state-owned RBS agreed to pay £4.2 billion in a settlement with US authority, the Federal Housing Finance Agency (“FHFA”), to resolve the scandal over its role in the sale of so-called “toxic” sub-prime mortgages that played a major role in the onset of the financial crisis of 2008.

Fines, legal bills and the cost of compensating mistreated customers reached £264 billion for 20 of the world’s biggest banks over the five years to 2016, according to new research from the CCP Research Foundation, one of the few bodies that analyses the “conduct costs” of banks.

The figure is higher than in the previous five-year period – when the costs amounted to £252 billion – and is up 32 per cent on the period 2008-12, raising doubts about efforts by the major financial services players to restore trust in the sector.