By James O'Toole
October 26, 2012: 2:46 PM ET
NEW YORK (CNNMoney) -- A state investigation into whether some of
the world's biggest banks manipulated key global interest rates has
widened to 16 institutions, according to a source familiar with the
New York state Attorney General Eric Schneiderman issued subpoenas
to nine banks in late August as part of an investigation into alleged
manipulation of the London Interbank Offered Rate, or Libor, according to the source, who was not authorized to speak publicly.
The Libor process generates rates, based on a survey of banks,
that are used as benchmarks for roughly $10 trillion of loans and some
$350 trillion of derivatives.
In June, U.K. bank Barclays (BCS) admitted to manipulating Libor
to appear stronger during the financial crisis and to benefit its
traders' positions. As part of a settlement with U.S. and U.K.
regulators, the bank agreed to pay $453 million.
Related: Explaining the Libor interest rate mess
Since then, other banks involved in setting Libor have come under scrutiny. Schneiderman previously subpoenaed Barclays, Citigroup (C, Fortune 500), Deutsche Bank (DB), HSBC (HBC), JPMorgan (JPM, Fortune 500), Royal Bank of Scotland (RBS) and UBS (UBS) in July and early August.
The newly disclosed subpoenas were sent to Bank of America (BAC, Fortune 500), Credit Suisse (CS), Societe Generale (SCGLF), Royal Bank of Canada (RY), Rabobank, Norinchukin Bank, Lloyds Banking Group PLC (LLDTF), Bank of Tokyo Mitsubishi UFJ and WestLB.
A spokesman for U.K.-based Lloyds said in a statement that the
bank was "assisting various regulators in their ongoing investigations.
And a spokesman for WestLB, now known as Portigon, said the firm
"continue[s] as always to help the regulators in any enquiries they may
Royal Bank of Canada spokeswoman Rina Cortese said RBC had
"determined that our Libor submissions reflected our cost of funds,"
meaning the bank did not attempt to manipulate the rate.
The other banks either declined to comment or did not immediately respond to requests for comment.
Schneiderman is leading the investigation along with Connecticut
state Attorney General George Jepsen. The two have also been in contact
with a number of their counterparts in other states.
"The investigation can now be described as a large, well
coordinated multistate investigation that includes Attorneys General
throughout the U.S.," Jaclyn Falkowski, a spokeswoman for Jepsen, said
in a statement. "A primary focus of the multistate's [sic] investigation
is to identify whether state and municipal issuers with financial
instruments pegged to Libor and other benchmark interest rates have been
harmed by the alleged conduct and, if so, to seek recovery of those
The Baltimore city government
is already the lead plaintiff in a class-action suit against Barclays
and other banks alleging that the city lost money due to Libor
manipulation. The comptroller of Nassau County in New York has claimed
the alleged fraud might have cost his county as much as $13 million on
deals related to $600 million of outstanding bonds.
Federal authorities are also investigating the matter, as are some
officials overseas. All told, analysts believe the banks implicated in
the scandal will rack up billions in losses from pending litigation and regulatory penalties.
CNNMoney's Catherine Tymkiw contributed reporting.