LIBOR Manipulation: Is Barclays Only the Beginning?

[From Bloomberg Law, here’s Tangent Capital Partners’ Chris Whalen on why the problem isn’t so much the banks manipulating LIBOR, but LIBOR itself. Link: Whalen: Libor Is A Collusive Price Set By Collusive Banks]

“Investigations by regulators in several countries, including Canada, America, Japan, the EU, Switzerland and Britain, are looking into allegations that LIBOR and similar rates were rigged by large numbers of banks. Corporations and lawyers, too, are examining whether they can sue Barclays or other banks for harm they have suffered. That could cost the banking industry tens of billions of dollars… As many as 20 big banks have been named in various investigations or lawsuits alleging that LIBOR was rigged.” (The rotten heart of finance) 

For your reference, legal advisories on the growing scandal, from lawyers and law firms on JD Supra. We’ll add updates as they come in:

Libor Manipulation Probe and Litigation Update (Sedgwick LLP):

“As U.S. and U.K. regulators’ investigations into the conduct of other major banks are ongoing, it seems possible that, depending on their findings, they could also be the subject of significant penalties. This may fuel ongoing litigation in the U.S. against financial institutions and other parties in relation to Libor manipulation and it is possible similar claims may be made in other jurisdictions, such as the U.K.” Read on»

FSA Fines Barclays £59.5 Million for Manipulation of LIBOR (Orrick, Herrington & Sutcliffe LLP):

“On 27 June 2012, the FSA published the final notice issued to Barclays Bank plc, detailing a £59.5 million fine for misconduct relating to its submission of rates that formed part of the London Interbank Offered Rate and the Euro Interbank Offered Rate. This is the largest ever fine that the FSA has imposed.” Read on»

Explanation of the Alleged LIBOR Manipulation Scheme (Howard Ullman):

“Good background on the alleged scheme to manipulate LIBOR. Via NPR’s Planet Money program, again. About halfway through, the program discusses allegations of interbank agreements to manipulate reported LIBOR rates… But does an interbank LIBOR conspiracy even make sense? Below in the link from economicpolicyjournal.com there’s an argument that the scandal is really a tempest in a teapot, because the banks can’t set the interest rates.” Read on»

On the Barclays Scandal-This is Not a Compliance Failure It’s an Ethical Failure (Thomas Fox):

“In the movie ‘Margin Call’ the character played by Jeremy Irons says that there are three ways to lead in business: (1) Be the smartest; (2) Be there first; (3) Cheat. I thought about this trichotomy when reading several articles about the fine of $450 MM agreed to by the British bank Barclays on June 27, 2012 to settle allegations that it tried to manipulate certain benchmarks for rates, most particularly the London Interbank Offered Rates or LIBOR.” Read on»

The Death of LIBOR? (Partridge Snow & Hahn LLP):

“Robert Diamond’s resignation today as CEO of Barclays PLC is the direct result of the bank’s deliberate submission of artificially low reports of its borrowing costs from 2005 to 2009. These reports were used by the British Bankers’ Association in compiling data from major banks and using that data in determining the London Interbank Offered Rate (‘LIBOR”). At least a dozen other banks, including Citigroup, Deutsche Bank, HSBC and UBS, are being investigated to determine if they likewise submitted false reports of their borrowing costs to the British Bankers’ Association.” Read on»

SFO Press Release on Manipulation of LIBOR (Orrick, Herrington & Sutcliffe LLP):

“… the Serious Fraud Office (SFO) published a press release regarding the manipulation of the setting of the London Interbank Offered Rate (LIBOR). In the press release, the SFO stated that it had been working closely with the FSA and now that the FSA has concluded its investigation into the regulatory misbehaviour, the SFO is considering whether it is both appropriate and possible to bring criminal prosecutions.” Read on»

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