Barclays settles with financial regulators over "significant failings" on interbank lending rates

The bank has agreed to pay total penalties worth £290 million to the Financial Services Authority (FSA), US Commodity Futures Trading Commission (CFTC) and the Fraud Section of the US Department of Justice (DOJ). It has also been granted conditional leniency from the DOJ's Antitrust Division "in connection with potential US antitrust law violations", according to a statement by the bank.

Bob Diamond, Barclays chief executive, said that he and other members of the bank's board of directors had ruled themselves out of consideration for any bonuses from the bank this year to reflect their "collective responsibility as leaders".

"The events which gave rise to [the settlements] relate to past actions which fell well short of the standards to which Barclays aspires in the conduct of it business," he said. "When we identified those issues, we took prompt action to fix them and co-operated extensively and proactively with the Authorities. Nothing is more important to me than having a strong culture at Barclays; I am sorry that some people acted in a manner not consistent with our culture and values."

The settlements relate to various industry-wide investigations into 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. 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 FSA said that the £59.5m fine it had imposed on Barclays reflected the bank's "serious, widespread" misconduct which had, it said, "extended over a number of years". The fine was discounted to reflect the bank's "full cooperation" during the FSA's investigation and its agreement to settle at an early stage.

"The integrity of benchmark reference rates such as LIBOR and EURIBOR is of fundamental importance to both UK and international financial markets," said Tracey McDermott, the FSA's acting director of enforcement and financial crime. "Firms making submissions must not use those submissions as tools to promote their own interests."

The regulator was pursuing "a number of other significant cross-border investigations" relating to interbank lending rates, she added.

Among the "significant failings" identified by the FSA, Barclays had taken into account requests from its interest rate derivatives traders when making its submissions as part of the LIBOR and EURIBOR setting process, the regulator said. It also attempted to influence submissions of other banks, and reduced its own submissions during the financial crisis as a result of "senior management's concerns over negative media comment", the FSA said.

The bank also failed to have adequate systems and controls in place relating to its LIBOR and EURIBOR submissions processes until June 2010, the FSA said, and failed to deal with issues related to its LIBOR submissions when these were escalated to its compliance department in 2007 and 2008.

The British Bankers' Association (BBA), which sponsors the daily rate, is currently undertaking a review of the way in which LIBOR is set and will "publish its findings shortly", the FSA said. In March, the BBA said that its planned consultation could include the introduction of a code of conduct for banks which contribute to the rate. The review process will also look at what financial instruments are included for the purposes of defining the rate as well as ways in which the statistical underpinning of contributions to the rate could be strengthened, it said.