The fallout from the Libor rate manipulation scandal threatens to leave banks liable for billions of dollars despite any settlements with regulators.
Eric Schneiderman, New York Attorney General, is joining other authorities including the US Justice Department in investigating rate rigging by banks across the nation.
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Schneiderman referred to the rate rigging actions as despicable conduct. State and local governments acting together can impose larger claims against banks and have greater leverage during settlement negotiations.
By consolidating all claims, state and local governments represent a much larger group of plaintiffs.
The Libor rate is a benchmark created from a daily survey of banks on behalf of the British Bankers Association of London that asks respondents how much they pay to borrow from each other over different periods in various currencies.
Trillions of dollars’ worth of transactions are conducted each day based on that benchmark rate.
Banks have already been sued by the City of Baltimore and San Diego County.
With so much fallout still to come from the scandal, investors may wish to reevaluate their bank holdings or refrain from making new investments until the dust has settled.