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RBS and Lloyds sued in New York over libor scandal

Royal Bank of Scotland and Lloyds are being sued in New York in the latest fall-out from the Libor rate-rigging scandal.

They were named in a civil case lodged at a federal court in Manhattan yesterday by the Federal Deposit Insurance Corporation (FDIC).

RBS, Lloyds, Barclays, HBOS, UBS, Rabobank, Deutsche Bank along with the US-based Bank of America, Citigroup and JP Morgan Chase are among 16 banks accused of fraudulently keeping the London Interbank Offered Rate [Libor] deliberately low to enrich themselves between 2007 and 2011.

The British Bankers' Association, which at the time oversaw the banks' daily Libor fixing, is also being sued.

RBS has already been fined €391m (£324m) following a European Commission investigation into the scandal.

The FDIC wants tp recoup losses it says was suffered by 10 US failed banks during the financial crisis. It has since taken them over.

Court papers state: "The Panel Bank Defendants fraudulently and collusively suppressed USD Libor, and they did so to their advantage."

Libor affects some $350trn [£210trn] worth of contacts around the world, including mortgages, bonds and consumer loans. It is one of the most crucial interest rates in finance.

It underpins trillions of pounds worth of loans and financial contracts RBS, Barclays, UBS and Rabobank have already paid $2.6bn dollars to settle US and European regulators' charges of rigging the Libor.

RBS has already been fined €391m (£324m) following a European Commission investigation into Libor-rigging.The banks signed agreements with the US Justice Department that allow them to avoid criminal prosecution if they meet certain conditions.

The process of setting the Libor came under scrutiny after Barclays admitted in 2012 that it had submitted false information to keep the rate low.

A number of US cities and municipal agencies, which hold bonds and other investments whose values are pegged to the Libor rate, have also filed suits against banks that set the Libor rate.

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