A multistate probe of alleged manipulation of interest rates threatens to leave banks liable for billions of dollars in estimated state and local losses from the scandal, even as they settle with national regulators.

New York Attorney General Eric Schneiderman is helping lead a probe into claims that banks rigged global benchmarks for borrowing, adding to investigations by other authorities, including the U.S. Justice Department. Royal Bank of Scotland Group Plc agreed yesterday to pay about $612 million to U.S. and U.K. regulators to resolve their claims.

"The damage to public entities is a matter of great concern to state and local governments," Schneiderman said in an interview. "These were allegations of really despicable conduct." More than 12 states are participating in the probe, according to a person familiar with the matter who requested anonymity because he isn't authorized to speak publicly.