US Pension Fund Accuses Banks of Rate-rigging

Barclays, Royal Bank of Scotland (RBS) and Goldman Sachs are among 13 banks being sued by the Alaska Electrical Pension Fund (AEPF), which alleges that they conspired to rig a key benchmark used to price interest rate swaps and other derivatives.

The AEFP accuses the banks of jointly manipulating the International Swaps and Derivatives Association (ISDA) benchmark rate, used to price derivatives, corporate bonds and even some private loans and pensions, in order to manipulate payments to investors

The ISDAfix is set each day when 15 banks submit prices to brokers at dealer broker Icap, which in turn publish a consensus.

However, in an echo of the London Interbank Offered Rate (Libor)-rigging scandal, bankers at the banks named are accused of using electronic chatrooms and phone calls to discuss the prices they should submit, and artificially massage the ISDAfix to a level that would boost their own profits. In papers lodged at a Manhattan court, AEPF said the banks routinely submitted identical rate quotes since at least 2009.

The accusations are already under investigation by US regulators, including the Commodity Future Trading Commission (CFTC), but the AEPF’s lawsuit us thought to be the first brought by a private company. The Fund hopes to win damages for all those who invested in interest rate derivatives tied to ISDAfix over an eight year period from January 2006.


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