Out-Law News 2 min. read
09 Jul 2012, 3:21 pm
In a short statement posted on its website on Friday, the Government department responsible for investigating and prosecuting serious and complex fraud said that it had "decided formally to accept the LIBOR matter for investigation". Its findings could lead to criminal charges being brought against individuals, potentially for breaches of the Fraud Act or of false accounting laws.
Danny Alexander, chief secretary to the Treasury, said that he was "delighted" by the decision, and that the Government would make sure the department would have "all the resources it needs to conduct this investigation in full".
"I want the SFO to follow the evidence wherever it goes, to bring prosecutions if they can," he told the BBC.
Last month, Barclays became the first bank to announce that it had entered into settlement agreements with UK and US regulators worth £290 million for "misconduct" in relation to its contributions towards the London Interbank Offered Rate (LIBOR) and its euro equivalent, EURIBOR. A statement released by the bank indicated that it had been granted "conditional leniency" in connection with "potential US antitrust law violations" from the US Department of Justice as part of the settlement.
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 as the basis for financial instruments including interest rate and currency hedging instruments, and to set the interest rate for syndicated loans. Contributing banks submit their rates directly to business data provider Thomson Reuters, which carries out the calculation and publishes LIBOR rates in 10 currencies at midday every London business day.
The Government has announced a review of the current framework for setting and governing LIBOR, to be conducted by chief executive-designate of the new Financial Conduct Authority (FCA), Martin Wheatley. As part of the review, Wheatley will consider the adequacy of existing civil and criminal sanctioning powers with respect to financial misconduct or market abuse in relation to LIBOR. Current regulator the Financial Services Authority (FSA), the conduct and compliance functions of which are due to be superseded by the FCA, is unable to pursue criminal sanctions in relation to LIBOR due to the nature of its powers.
The European Commission is also considering changes to the law which would make the manipulation of market references such as LIBOR and EURIBOR into a criminal offence. Michel Barnier, internal market commissioner, told the Financial Times that he would introduce amendments to proposed market abuse laws "within the next fortnight".
The draft Directive and Regulation, which are currently being negotiated with the European Parliament and EU member states, do not specifically refer to interbank lending rates. However they define insider dealing and market manipulation as criminal offences and lay down minimum penalties.
