In connection to the alleged fraudulent and anticompetitive conduct in relation to the Libor rigging scandal, a $100m (£77m) settlement with more than 40 US states has been reached by Barclays.
Four years ago, the bank had been imposed with a fine of £290 m by regulators from U.K. Other agencies have also imposed fines on Barclays which include the US Department of Justice for allegedly manipulating the benchmark interest rate. This agreement, announced by the New York attorney general, Eric Schneiderman, follows such fines and settlements by the bank.
In a series of incidents of setting of the US dollar Libor to resolve investigations with attorney generals across the US, Barclays is among the first in a list of several banks involved in the issue.
Since customers and clients did not know Barclays and other financial firms were manipulating the rate, government entities and not-for-profit organisations were defrauded of funds, Schneiderman said. The rate is used to price an estimated $350tn of financial products.
“There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the fair functioning of financial markets. As a result of Barclays’s misconduct, government entities and not-for-profits were defrauded of funds that otherwise could have been used to benefit the people of New York,” said Schneiderman.
Details of emails and conversations between Barclays staff about making changes to the Libor rate during two periods are included in the settlement agreement. These two periods refer to most recently to benefit the positions of traders and earlier during the financial crisis when the bank tried to reduce its rate to avoid the idea it was in trouble.
It was pleased to have resolved the investigation, Barclays said.
“We believe this settlement is in the best interests of our shareholders and clients, and allows us to continue to focus on the future and serve our clients,” the bank said.
During the time of the scandal Libor rate was fixed on the basis of submissions about the rate the banks thought they would be asked to pay to borrow from rival banks over different time frames and hence they were set by a panel of banks. Later on change were made in the way Libor is calculated.
In one exchange in December 2007, a Barclays employee involved in submitting rates told his supervisor: “At the same time that we were setting at 5.30% I was paying 5.40% … in the market. Given a free hand I would have set at around 5.45% … My worry is that we [both Barclays and the contributor bank panel] are being seen to be contributing patently false rates. We are therefore being dishonest by definition and are at risk of damaging our reputation in the market and with the regulators,” a Barclays employee reportedly told his supervisor in one exchange in December 2007.
The settlement is with 43 US states and the District of Columbia.
(Adapted from The Guardian)