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CalPERS Investment Chief Considers Libor Litigation

<em>CalPERS will investigate whether it has been harmed by the alleged Libor rate-fixing scandal and will pursue damages from banks if that is the case.</em>
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(July 17, 2012) — The chief investment officer of the largest pension plan in the US signaled that his fund could pursue litigation against banks over the alleged manipulation of the London interbank offered rate (Libor).

Joe Dear, the CIO of the $233 billion California Public Employees’ Retirement System (CalPERS), made the admission at the fund’s board meeting on Monday. Officials at CalPERS confirmed that the fund is studying the impact of the alleged rate fixing but could not supply more specific information at this time.

“If we were harmed by specific actions by specific banks, we will seek remedial correction,” Dear said at the meeting, according to Bloomberg. “My hope is that the authorities will review the situation and prosecute where possible those who have done the system harm. It is difficult to underestimate the magnitude of the Libor rate fixing as an episode that fundamentally undermines investors’ confidence in our capital markets.”

Dear also slammed the financial services industry, saying that the alleged rate rigging had “demonstrated that it cannot be trusted to make decisions in the long-term interests of investors” like CalPERS, according to the Los Angeles Times.

The scandal involves the alleged manipulation of the interest rate that London banks are charged when they borrow from one another. Several banks were accused of conspiring to artificially lower the rate with the aim of lowering bowering costs and projecting a healthier financial image during the 2008 crisis.

Recent penalties levied by regulators have again brought the issue back into the spotlight. On June 27, US and British Regulators hit Barclays Bank with a staggering $450 million fine for manipulating Libor during and after the 2008 financial crisis. Barclays and other banks, including the Royal Bank of Scotland, Lloyds, and Deutsche Bank are all facing inquiries over the alleged rigging of the rate. The US Justice Department and several state attorneys general have also opened investigations into the matter.