“Libor could well be the asbestos claims of this century.” James Cox, law professor
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New York Lender Files Libor Lawsuit
In the latest sign of the potential legal vulnerability facing banks ensnared in the world-wide probe of interest-rate manipulation, a New York lender alleges in a lawsuit that it was cheated out of interest income because rates on loans tied to Libor were “artificially” depressed.
The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.
Berkshire Bank, with 11 branches in New York and New Jersey and about $881 million in assets, claims in a proposed class-action lawsuit in U.S. District Court in New York that “tens, if not hundreds, of billions of dollars” of loans made or sold in the state were affected by rigging the London interbank offered rate.
Many adjustable-rate commercial and home loans are pegged to Libor, meaning that “misrepresentation…on the date on which a loan resets will generally reduce the amount of interest that a lender receives by an equivalent amount,” the bank alleges.
The lawsuit, filed last week, targets as defendants the 16 banks on the panel that set the U.S. dollar London interbank offered rate from August 2007 to May 2010.
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