Barclays to pay $453m fine over interbank lending rate investigation
UK BANKING giant Barclays will pay at least $453m to US and British authorities to settle a probe into manipulation of the key interbank lending rate, known as Libor.
Regulators have been investigating allegations that several banks, including Barclays, manipulated the rate, which underpins trillions of dollars of derivatives contracts worldwide and is also widely used as a reference rate for corporate lending.
Barclays regularly reported borrowing rates lower than the rates it was actually paying during the financial crisis in order to mask its distress, according to a statement from the US Commodity Futures Trading Commission.
Damning emails that regulators released yesterday made clear that traders and the "submitters" tasked with reporting daily rates worked together for years to make the rates submitted suit the traders' and the bank's purposes.
In some cases, submitters set themselves reminders on their calendars to submit low rates on certain dates, according to the emails. In others, traders expressed overwhelming gratitude for low submissions which protected them from losses.
The US CFTC said Barclays attempted to manipulate Libor submissions "sometimes on a daily basis" over a four-year period starting in 2005. The CFTC ordered the bank to pay a $200m penalty, saying it was the largest civil monetary penalty it has ever imposed.
Barclays also settled with the US Department of Justice and the UK's Financial Services Authority and will pay fines of $160m and $92.m respectively.
The Department of Justice said Barclays was the first bank being probed "to provide extensive and meaningful cooperation to the government", adding that the bank's assistance had aided its criminal investigation.
In March the bank said it was engaged in a possible resolution with regulators looking into potential enforcement proceedings.
As well as the FSA and CFTC, other authorities probing Libor manipulation include the European Commission and Japan's Financial Services Authority.
Other banks involved in the probe include Citigroup, HSBC, Royal Bank of Scotland and UBS. Several banks have suspended traders over the investigations. No criminal charges have been filed.
Libor is the benchmark for about $360 trillion worth of financial contracts worldwide. A daily poll asks banks at what rate they think they will be able to borrow money from one another in 10 major currencies and for 15 borrowing periods, ranging from overnight loans to 12 months.
As the credit crisis took hold in 2008, allegations started mounting that Libor no longer reflected banks' real borrowing costs, and authorities began examining whether traders tried to influence the rate to profit on bets on its future direction. (Reuters)