Banks urge U.S. judge to throw out Libor lawsuits

By Bernard Vaughan

NEW YORK, March 5 (Reuters) - Banks facing a barrage oflawsuits from customers accusing them of interest-rate riggingargued on Tuesday that the cases should be dismissed, sayingthere is no evidence of antitrust or other violations.

Plaintiffs including community banks and local governmentshave sued Bank of America, JPMorgan Chase & Co and others for allegedly manipulating the London InterbankOffered Rate, commonly known as Libor.

Libor, which has been the focus of a global investigation byregulators, is used to set interest rates on more than $350trillion of securities from mortgages to complex derivatives.

At a hearing before U.S. District Judge Naomi Reice Buchwaldin Manhattan, lawyers for the banks urged that the cases bethrown out before trial. The cases include proposed class actionlawsuits alleging violations of antitrust law and theCommodities Exchange Act, which regulates the trading ofcommodity futures in the United States.

The antitrust claims should be dismissed because there is nodocumented agreement among the banks to keep Libor low, arguedRobert Wise, a lawyer for Bank of America.

Further, he told the judge, the banks did not restrain tradebecause Libor is an estimate they provide on their borrowingcosts, not a price for a product they set in a competitiveprocess.

"Libor is not something that is bought, or sold, or traded,"said Wise, who also argued that the plaintiffs lacked standingto bring the lawsuits. "It is simply a benchmark, an average."

Judge Buchwald questioned the plaintiffs' attorneys on thatargument, noting that even if banks suppressed Libor they stillcompeted against each other for business once the rates wereset.

Bill Carmody, a lawyer representing the city of Baltimoreand other plaintiffs, argued that Libor is an essentialcomponent of the price some customers paid for interest-rateswaps and other financial products tied to Libor.

Carmody said that banks don't compete against each otherwhen they submit their Libor rates to the British Bankers'Association each business day, though he later clarified hisstatement to say that banks compete over products tied to theinterest rate that they set.

Wise attacked this argument, saying that the "Plaintiffs areconfusing a claim of being deceived ... with a claim for harm tocompetition."

In the lawsuits, plaintiffs contend that the banks reportedartificially low Libor rates starting in August 2007 to playdown their borrowing costs and conceal their wavering healthwhile boosting their own returns on trades.

The lawsuits seek potentially billions in damages. Theplaintiffs argue they were robbed of more lucrative payouts onfinancial products tied to Libor because of rate rigging.

Citigroup Inc, HSBC Holdings Plc, DeutscheBank AG and UBS AG are also among the banksnamed as defendants in the various lawsuits.

Three banks have reached settlements with authorities toresolve liability.

Most recently, Royal Bank of Scotland Group Plc agreed to pay $612 million to U.S. and British authorities. Lastyear, UBS agreed to pay $1.5 billion in penalties and BarclaysPlc agreed to pay $453 million. The scandal led to theresignation of Barclays' chairman, chief executive andchief operating officer.

The cases are consolidated under In Re: Libor-BasedFinancial Instruments Antitrust Litigation, U.S. District Courtfor the Southern District of New York, No. 11-md-2262.