US regulators call in banks over LIBOR scandal

16th Aug 2012 12:45

The LIBOR scandal is once again hitting the headlines with seven banks set to be called in for questioning in the US over the alleged rigging of inter-bank lending rates. HSBC, Royal Bank of Scotland, Barclays, Citigroup, Deutsche Bank, JPMorgan and UBS have all been subpoenaed by the Attorneys General of New York and Connecticut. Barclays has already been fined a record £290m for trying to manipulate LIBOR but still faces investigations in both US and the UK. Authorities believe at least one other bank must have worked with Barclays to manipulate rates. The investigation will examine whether or not there is sufficient evidence to bring about a criminal prosecution. New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen will be jointly investigating the case. Ralph Silva, a banking analyst at SRN, said: "This is the first time we're seeing a legal case that is trying to prove [collusion]. If they can prove it, then all the fees could amount to tens of millions of pounds."This is actually a bit surprising. We expected to hear more banks being served with LIBOR subpoenas, but we didn't expect to see them all happen at the same time."It's quite clear that over the past six months [regulators] have put a tremendous amount of resources into this, and it looks like all those investigations are coming to a head right about now."In the UK the Chancellor of the Exchequer, George Osborne, has already commissioned Martin Wheatley, managing director of the Financial Services Authority (FSA), to undertake a review of the framework for the setting of LIBOR. The review will look into: How LIBOR is constructed, including whether to use actual trade data to set the benchmark, rather than banks' estimates; How LIBOR is regulated; What sanctions can and/or should be available to authorities to tackle LIBOR abuse Wheatley previously said it was clear that urgent reform of the LIBOR compilation process was required.