Washington/London: British bank Barclays Plc. will pay at least $450 million 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 London Interbank Lending Rate (Libor), 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 on Wednesday.
Hefty fine: The Barclays headquarters (left) in Canary Wharf, London.
Damning emails that regulators released on Wednesday make 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 that protected them from losses.
The US CFTC said Barclays attempted to manipulated Libor submissions “sometimes on a daily basis” over a four-year period starting in 2005. The CFTC ordered the bank to pay a $200 million 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 $160 million and $92.8 million, 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.