The Alaska Electrical Pension Fund filed lawsuits yesterday against 13 banks across the world for alleged rate manipulation. The banks include Bank of America, Citigroup and Goldman Sachs. More from Chief Investment Officer:
The Alaskan fund filed a complaint to the Manhattan Federal Court on Thursday, claiming the banks ran a “secret conspiracy” to set the ISDAfix rate at artificial levels from 2009 to 2012, Bloomberg reported. This action caused billions of dollars of investor losses, the fund claimed.
The ISDAfix is used to set rates for interest rate derivatives and other financial instruments.
The pension fund accused the banks of executing rapid trades just before the rate was set, an action referred to as “banging the close”. This caused brokerage firm ICAP, which was also cited in the filing, to delay processing trades until the banks moved the rate where they wanted, meaning it did not necessarily reflect market activity.
All of the defendants either declined to comment or did not respond to Bloomberg’s calls, the newswire said.
From the fund’s court filing:
“This could not have happened without some form of advanced coordination…even if reporting banks always responded similarly to market conditions, the odds against contributors unilaterally submitting the exact same quotes down to the thousandth of a basis point are astronomical. Yet, this happened almost every single day between at least 2009 and December 2012.”