RBC, 15 other global banks face revived lawsuits over LIBOR-rigging allegations

A federal Appeals Court in New York City has reinstated lawsuits against 16 of the world's largest banks, including the Royal Bank of Canada, alleging they colluded to manipulate a benchmark interest rate.

The 2nd U.S. Circuit Court of Appeals in Manhattan on Monday restored the lawsuits, which had previously been dismissed by a lower-court judge.

The lawsuits were brought by people who bought investments sold by the banks that were based on a key lending rate known as LIBOR, an acronym for London Interbank Offered Rate, withevidence the banks were lying about and rigging in their favour.

• Royal Bank accused by FDIC of having role in LIBOR-rigging
• RBC subpoenaed in LIBOR probe

A previous judge had dismissed the lawsuits because he saidtheLIBORsetting process was collaborative rather than competitive. Thatjudge also found any manipulation of the rate did not cause investorsanti-competitiveharm.

But a new judge disagreed with that Monday, and reinstated the suits.

"Appellants sustained their burden of showing injury by alleging that they paid artificially fixed higher prices," Circuit Judge Dennis Jacobs wrote for a three-judge appealspanel.

LIBOR is a lending rate that is the basis for hundreds oftrillions of dollars worth of consumer loans and savings rates around the world. It's a number, calculated and released dailyby banks in London, that is supposed to show the rate at which they are lending money to each other for the short term.

• Two ex-bankers get jail time for trying to fix LIBOR
• Deutsche Bank fined $2.5 billion for role in rigging LIBOR

The banks are alleged to have lied about their internalrates to put theLIBORrate at a more favourable level for them. That would move other interest rates for consumers and businesses higher or lower thanotherwise should have been.

"A LIBOR increase of one per cent would have allegedly cost the Banks hundreds of millions of dollars," the judges said in the ruling.

Rigging the rate costthe bank's customers large institutions named in the lawsuitsuch as theUniversity of California, and cities such as Baltimore, Houston and Philadelphia billions over the years, moneythey are now trying to recoup.

The financial stakes of reinstating numerous pricey lawsuits for damagesare huge. As the judges' put it in their decision: "Requiring the banks to pay damages to every plaintiff who ended up on the wrong side of an independent LIBORdenominated derivative swap would, if appellants' allegations were proved at trial, bankrupt 16 of the world's most important financial institutions."

Individual lawsuits could still be thrown out, but Monday's ruling means they must all be reconsidered on a case-by-case basis.

In addition to the Royal Bank of Canada, the following banks are named in the suits:

• Royal Bank of Scotland.
• Bank of America.
• SocitGnrale.
• UBS.
• Barclays.
• Citigroup.
• Credit Suisse.
• Deutsche Bank.
• HSBC.
• JPMorgan Chase.
• NorinchukinBank.
• Rabobank.
• Portigon.
• Bank of Tokyo-Mitsubishi.
• Lloyds.

Worldwide, those banks and others have already paid more than $9 billion in fines related to LIBORrigging, and almost two dozen people have been charged in relation to the story. The Financial Conduct Authority, a regulator that governs banking institutions in London, has said it will look at better ways of calculating the rate in the wake of the scandal.

A lawyer for the banks says they're considering the ruling.