August 25, 2011 / 8:00 PM / 6 years ago

Schwab sues 11 major banks for manipulating Libor

* Schwab says banks conspired to drive down Libor

* Regulators probing alleged manipulation

By Jonathan Stempel

NEW YORK, Aug 25 (Reuters) - Charles Schwab Corp (SCHW.N), the discount brokerage and money manager, has filed two lawsuits accusing 11 major banks of conspiring to manipulate Libor, which is used to set interest rates on hundreds of trillions of dollars of securities.

According to complaints filed Tuesday with the U.S. District Court in San Francisco, where Schwab is based, the banks violated antitrust, racketeering and securities laws by teaming up to depress the London Interbank Offered Rate, a floating benchmark for what banks charge each other on short-term loans.

Schwab’s lawsuits said the collusion deprived it of returns on tens of billions of dollars of Libor-based investments that the company and eight of its money market and ultra-short term bond mutual funds made from 2007 to early 2011.

“Surreptitiously bilking investors of their rightful rates of returns on their investments, defendants reaped hundreds of millions, if not billions, of dollars in ill-gotten gains,” Schwab said. Its lawsuits seek unspecified actual and punitive damages, which Schwab said can be tripled under federal law.

Defendants include the three largest U.S. banks -- Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N). Others include Barclays Plc (BARC.L) Credit Suisse Group AG CSGN.VX, Deutsche Bank AG (DBKGn.DE) HSBC Holdings Plc (HSBA.L), Lloyds Banking Group Plc (LLOY.L), Royal Bank of Scotland Group Plc (RBS.L), UBS AG UBSN.VX and WestLB AG WDLGgf.F.

    Bank of America spokesman Lawrence Grayson declined to comment, but Citigroup spokeswoman Danielle Romero-Apsilos said: “We believe the lawsuits are without merit.” JPMorgan did not immediately respond to a request for comment.

    Schwab joins a variety of asset managers and pension funds to sue over Libor, after U.S. and Japanese regulators were reported earlier this year to have been investigating possible manipulation, focused on the 2006-2008 period. [ID:nLDE72E216]

    About $350 trillion of derivatives and other financial products are based on Libor, and small declines in the rate can cost borrowers and lenders billions of dollars in interest income.

    Last month, UBS said authorities including the U.S. Department of Justice had granted it conditional leniency or conditional immunity in the probe, in exchange for the bank’s continued cooperation. [ID:nLDE76P095]

    The cases are Schwab Money Market Fund et al v. Bank of America Corp et al, and Charles Schwab Bank NA et al. v. Bank of America Corp. et al; U.S. District Court, Northern District of California, Nos. 11-04186 and 11-04187. (Reporting by Jonathan Stempel, editing by Bernard Orr)

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