Doug Carroll

USA TODAY

A U.S. bank regulator is suing 16 of the biggest U.S. and foreign banks, accusing them of manipulating an influential benchmark used to set interest rates on contracts around the world.

The Federal Deposit Insurance Corp. alleges the banks committed fraud by manipulating the London Interbank Offered Rate, or Libor, to enrich themselves. Those banks, which include Bank of America, Citigroup and JPMorgan Chase, all sit on an industry panel that set the London Interbank Offered Rate, or Libor.

The FDIC is suing on behalf of a group of U.S. banks that failed during the financial crisis and were taken over by the agency.

The FDIC alleges that collusion among the banks that set Libor rates interfered with the competitive process in the markets for money and Libor-based financial instruments. Their actions artificially increased the prices they charged and the margins they earned in those markets, according to the FDIC's complaint.

The Libor panel banks' actions allowed them to charge higher underwriting fees and obtain higher offering prices for financial products "to the detriment of the closed banks and other consumers," the FDIC alleged.

Libor is used to set rates on trillions of dollars of mortgages, car loans, student loans and some complex financial derivatives. Libor rates cover multiple currencies worldwide for varying time periods.

Authorities in the U.S., Europe and Asia have been investigating Libor manipulation for at least two years. Barclays, Royal Bank of Scotland, Swiss banking giant UBS, Netherlands-based Rabobank and ICAP, the world's largest inter-dealer broker, collectively have been fined $3.6 billion by U.S., British and other regulators in connection with the probe.

The FDIC complaint draws on admissions by banks that have settled government charges.