Business World

Sunday 18 February 2018

Police to probe rate-setting scandal at Barclays bank

Matt Falloon and Kirstin Ridley

BRITAIN brought in the fraud squad to investigate possible crimes following a scandal which has engulfed Barclays bank and is expected to spread to other lenders.

More than 20 other banks are being probed by regulators from London to Japan and Brussels to North America. A source said Barclays stood out for the way it co-operated with regulators.

Shares in Barclays tumbled as much as 18pc at one point yesterday, wiping out £4.2bn (€5.25bn) from its share price -- the biggest one-day fall since 2009. Shares closed down 15.5pc.

The bank agreed to pay a record $451m (€363m) fine to US and British regulators on Wednesday for attempting to manipulate the London Interbank Offered Rate (Libor) between 2005 and 2008. It is the first bank to settle in a case that also includes most of the world's other largest financial institutions.

"This is a scandal, it's extremely serious. They've paid a very large fine and quite rightly but frankly the Barclays management team have some big questions to answer," British Prime Minister David Cameron told the BBC.

"Who was responsible? Who was going to take responsibility? How are they being held accountable?" he said.

Review

He and Chancellor George Osborne both said regulations would be reviewed and tightened if necessary.

Barclays chief executive Bob Diamond has acknowledged that the settlement would damage customer trust in the bank, and said he and other senior executives would forgo bonuses this year. Politicians, including some from Cameron's Liberal Democrat coalitions partners, say Diamond should resign.

The Libor rate, compiled from rates that banks pay each other for loans, is used throughout the financial system to set loan rates around the world.

The investigation -- which disclosed emails in which bankers appeared to promise bottles of champagne to thank each other for help in setting the rates -- has added to a storm of anger against the industry.

"Done ... for you big boy," read one message sent by a Barclays banker to one of the lender's traders, who had asked him to fix a key lending rate artificially low.

In another message, after Barclays submitted a rate that was lower than the previous day's, an external trader says: "Dude, I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."

George Osborne said the email exchanges "read like an epitaph to an age of irresponsibility".

Laws brought in when the Labour party was in power did not give the regulator power to impose criminal penalties for manipulating Libor, but the government would look at changing them, he said.

"As part of our review into Libor and the strength of the financial regulatory architecture, we will examine if there are any gaps in the criminal regime inherited by this government and we will take the necessary steps to address that."

Police could still find ways to prosecute. A spokeswoman for the Serious Fraud Office confirmed it was in discussions with the regulator over the case.

The British Bankers Association, which establishes the parameters for how Libor is set each day, said it was "shocked" by the behaviour that led to Wednesday's fine. (Reuters)

Irish Independent

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