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British banks face US Libor probe

by LLB Editor
16th Aug 12 9:27 am

Three British banks face scrutiny from a US state prosecutor after being issued with subpoenas over the Libor rate-rate scandal, it has emerged.

Barclays, HSBC and Royal Bank of Scotland have been issued with subpoenas by the attorneys general of New York and Connecticut. The details of the subpoenas involved are not yet clear, but they are requests for more information backed with the force of law.

Requests have also been sent to Citigroup, JPMorgan Chase, UBS and Deutsche Bank, according to a source.

Regulators in the UK and US have already fined Barclays nearly £290m. Barclays declined to comment when asked about the subpoena on Wednesday evening, but it has admitted it submitted false information to keep the Libor rate low.

Libor, short for the London interbank offered rate, is the lending rate which affects loans and mortgages. It is also used to set interest rates on trillions of dollars in contracts around the world for credit cards and mortgages.

Libor is a self-policing system which relies upon the information global banks send to a British banking authority.

Barclays said it had put forward figures lower than accurate for its interbank borrowing, including during the financial crisis in the autumn on 2008.

The reported Libor rates made Barclays look healthier than it was and the fallout has damaged the bank’s reputation and sent shockwaves through the rest of the industry.

In a report filed with regulators at the end of last month, UBS said agencies, including state attorneys general, were looking at whether the bank had attempted to manipulate the Libor rate.

JPMorgan Chase and Citigroup have declined to comment.

The subpoenas will be an early challenge for Sir David Walker. The City grandee will join Barclays as a non-executive director from September 1 before succeeding current chairman Marcus Agius, who resigned in the wake of the Libor-rigging scandal.

Sir David has previously led a review into bank governance for former prime minister Gordon Brown.

The UK’s Serious Fraud Office has announced it will investigate “a number of financial institutions” over the alleged manipulation of the interbank lending rate and related interest rate benchmarks.

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