By Matthew Perlman

Law360 (January 16, 2019, 8:27 PM EST) — A Connecticut bank on Tuesday accused the owner of the New York Stock Exchange of conspiring with some of the world’s largest banks to artificially deflate a key financial benchmark after taking over responsibility for the rate setting following a previous price-fixing scandal.

Putnam Bank filed a proposed class action in New York federal court alleging that the 18 banks that help set the London Inter-bank Offered Rate, including Bank of America, Citigroup and JPMorgan, have been intentionally depressing the benchmark through their submissions to an affiliate of Intercontinental Exchange Inc., owner of the NYSE.

ICE took over rate setting duties for Libor from the British Bankers’ Association in 2014 after a series of allegations emerged of banks colluding to fix benchmarking rates, which has resulted in millions of dollars in fines, as well as follow-on private litigation. Putnam’s suit alleges that investors trading in instruments tied to U.S.-denominated Libor have received lower interest payments from the banks because they continue to fix the rates by lowballing their submissions to ICE.

“By way of example only, with hundreds of billions in floating rate issuances, the lower that USD ICE LIBOR was set, the lower the amount of floating interest that the panel bank defendants were obligated to pay investors,” the complaint says. “[E]very basis point … movement in USD ICE LIBOR downward would save the panel bank defendants more than $100 million in payments on such notes over the class period.”

Libor tracks how much banks charge one another to borrow funds and affects the prices of financial products ranging from loans to securitized instruments, which are sold by banks and other institutions. The rate is set in several currencies by averaging submissions from the panel banks, which are now collected by ICE.

Allegations about banks colluding to set Libor and other benchmarking rates during the financial crisis began emerging in 2011. A number of banks have reached settlements with enforcers in the U.S. and the U.K. over the alleged schemes and private litigants have also inked millions in settlement agreements with some of the banks.

The U.K. is also phasing out its use of the rate and alternatives have begun to emerge, including one from ICE.

According to Putnam’s suit, one problem with the current system is that the process of setting Libor assumes that there’s an underlying market for interbank loans, but that’s no longer the case. The lack of transactions in this space has allegedly allowed the banks to manipulate the process, and the suit argues that ICE has known about the issue and refused to act at least since it took over calculating the rate, in order to protect its profits.

“If it came clean, there might have been no benchmark for it to administer,” the complaint says. “Benchmark administration is part of ICE’s data services division, which ICE identifies as a significant component of its overall business.”

An attorney for Putnam, David Scott of Scott & Scott Attorneys at Law LLP, told Law360 on Wednesday that the firm uncovered the latest allegations through an in-depth investigation.

“Our clients have sustained significant damage, and intend to pursue these claims on their own behalf and those of other injured parties,” Sokol said.

Representatives for ICE, Barclays, JPMorgan, Credit Suisse, Bank of America and Rabobank declined to comment on the lawsuit Wednesday. Representatives for the other banks did not immediately respond to requests for comment.

The panel banks named in the suit are Bank of America, Citigroup, JPMorgan, Barclays, BNP Paribas, BTMU, Credit Agricole, Credit Suisse, Deutsche Bank, HSBC, Lloyds, Norinchukin, Rabobank, RBC, RBS, Societe Generale, Sumitomo and UBS.

Putnam is represented by attorneys from Scott & Scott Attorneys at Law LLP, Korein Tillery LLC, Lowey Dannenberg PC, Robbins Geller Rudman & Dowd LLP and Robins Kaplan LLP.

Counsel information for ICE and the banks was not immediately available Wednesday.

The case is Putnam Bank v. Intercontinental Exchange Inc. et al, case number 1:19-cv-00439, in the U.S. District Court for the Southern District of New York.

–Additional reporting by Joanne Faulkner, Najiyya Budaly and Stewart Bishop. Editing by Breda Lund.