Out-Law News 1 min. read

Regulators investigate LIBOR antitrust claims


Regulators in the US and Europe are currently investigating whether banks set artificial rates during the 2008 financial crisis, according to press reports. The investigations relate to both the London Interbank Offered Rate (LIBOR) and its Euro equivalent, EURIBOR.

LIBOR is a daily reference rate based on the interest rates at which banks can borrow unsecured funds from other banks. It is widely used to calculate the applicable interest rate for financial instruments including currencies, variable rate mortgages and syndicated loans.

In April of this year, the Wall Street Journal reported that the US Department of Justice Antitrust Division had issued Grand Jury subpoenas against some of the world's largest banks as part of its own investigation.

In July, Swiss banking giant UBS admitted that it said it had been granted leniency or immunity from potential violations by some authorities, in return for its continuing cooperation with the investigations.

Last month, the European Commission announced that it had undertaken unannounced inspections of certain banks in the sector of financial derivative products linked to the (EURIBOR) in certain Member States. The Commission said it has concerns that the companies concerned may have violated EU antitrust rules.  The EURIBOR rate is a similar daily reference rate based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to each other. There are 44 contributors to the EURIBOR rate.

The Daily Telegraph claimed that the London offices of Royal Bank of Scotland (RBS) had been raided as part of the European Commission’s EURIBOR investigation. The London office of Deutsche Bank was also raided, it claimed. It said that further raids were expected with Barclays, HSBC and Lloyds Banking Group likely to be among the targets.

In its interim management statement earlier this year, RBS had acknowledged that the European Commission was among various authorities investigating the banking group regarding various interbank offered rates.

"As a panel bank in each instance, RBS Group is cooperating with these investigations and is keeping other relevant regulators informed. It is not possible to estimate with any certainty what effect these investigations and any related developments may have on the Group," RBS said.

EURIBOR-EBF, the body set up by the European Banking Federation (EBF) to oversee EURIBOR, said in a statement that it had received no official notification of any investigation from the Commission. However, it had "nothing to hide".

"Clearly the Commission enquiry focuses on the use of EURIBOR fixing by some derivatives market practitioners. Therefore, neither the governance nor the quality of the fixing itself are being questioned. We ensure the good governance of EURIBOR-EBF and the close monitoring of the benchmark," said EBF chief executive Guido Ravoet.

He added that the large number of banks which are involved in setting the Euribor "should be a guarantee" against possible collusion.

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