British banking giant Barclays Plc on Wednesday reached a settlement with authorities in the United States and U.K. for 290 million pound sterling ($453 million), for false submissions of London and European interbank rates.
The settlement will resolve allegations that Barclays had manipulated key interbank offered rates, specifically the Libor (London Interbank Offered Rate) and the Euribor (Euro Interbank Offered Rate)—which track interbank borrowing rates. The Libor, created by the British Banking Association and tracked by Thomson Reuters, is a key rate which helps determine other interest rates and spreads.
The Libor is created by submissions from the treasury department at major banks, which disclose the rates at which they lend to or borrow from other banks. Within the banking industry, there are so-called “Chinese Walls,” which are supposed to guard against conflicts of interest in cases such as these, as the treasury submitters should not be influenced by the interests of traders and bankers.
Barclays’s settlement was reached with the U.S. Department of Justice, the U.K.’s Financial Services Authority, and the U.S. Commodities Futures Trading Commission.
“When a bank acts in its own self-interest by attempting to manipulate these rates for profit, or by submitting false reports that result from senior management orders to lower submissions to guard the bank’s reputation, the integrity of benchmark interest rates is undermined,” said David Meister, the enforcement director of the CFTC, in a statement.
The alleged manipulations happened years ago, during 2005 and 2006, and Barclays said that as of today the bank is following proper procedures. “The events which gave rise to today’s resolutions relate to past actions, which fell well short of the standards to which Barclays aspires in the conduct of its business,” said Barclays CEO Bob Diamond in a statement. In addition, Diamond and several of the bank’s most senior executives have agreed to forego bonuses for this year.
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