Libor fines could total $22bn after 11 more banks hit by scandal

Friday, 13 July 2012 11:05

By Kay Carson

As many as 12 global banks could be hit with fines totalling almost $22 billion (£15 million), for alleged interest rate rigging, it has emerged.

The claim comes just hours after it was revealed that US Treasury Secretary Tim Geithner contacted the Bank of England in 2008 with worries about possible London Interbank Offered Rate (Libor) distortion.

So far, Barclays has been fined $456 million (£295 million) after admitting rate fixing when borrowing from other banks. The scandal forced chief executive Bob Diamond to quit and forego almost £20 million of bonuses.

Now at least 11 more banks are set to be penalised for rigging interbank rates, according to Morgan Stanley.

Bank of America, Citigroup, JP Morgan, Credit Suisse, UBS, Deutsche Bank, Société Générale, RBS, HSBC and Lloyds are reported to be among the banks under investigation.

Back in 2008, Mr Geithner was head of the New York Federal Reserve Bank. His private e-mail to Bank of England Governor Mervyn King outlined ways to improve Libor credibility.

According to a report in the Washington Post, the e-mail included a memo on best practices for calculating Libor “including procedures designed to prevent accidental or deliberate misreporting.”

The New York Federal Reserve Bank is due to release documents today proving that it took “prompt action” in 2008 to draw attention to Libor problems.

Meanwhile, the Libor scandal has prompted investigations into other rate setting mechanisms including the Euribor (European Interbank Offered Rate).

EU competition commissioner Joaquin Almunia said: “We are focusing our investigations on suspected cartel arrangements involving financial derivatives related to these benchmark rates, including possible collusion over the setting of the rates.”

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