US investigators are hot on the trail of some of the world’s biggest banks — including Citigroup and Bank of America, among others — that may have colluded to manipulate a key interest rate before and during the financial crisis, affecting trillions of dollars in loans and derivatives, WSJ.com reported late yesterday, citing people familiar with the situation.

Law-enforcement officials are studying transactions related to understated borrowing costs by US and European banks tied to the London interbank offered rate, or Libor. At worst, the banks formed a global cartel and coordinated how to report borrowing costs between 2006 and 2008, according to the report.

Libor is set every day in London, based on submissions by a panel of banks that report the rate they are paying to borrow.

Led by the US Justice Department and Securities and Exchange Commission, the inquiry is analyzing whether banks were understating their borrowing costs. During the worst of the crisis, banks were struggling with souring assets on balance sheets and questions about liquidity.

About $10 trillion in loans and $350 trillion in derivatives are tied to Libor, which affects costs for everything from corporate bonds to car loans.