The Latest Bank Disgrace: LIBOR Scam

April 5, 2011 Updated: October 1, 2015

POSSIBLE COLLUSION: A pedestrian walks by a Bank of America branch office this past January in San Francisco, California. Bank of America was one of four of the world's largest banks which were served subpoenas for possible colluding over LIBOR rates be (Justin Sullivan/Getty Images)
POSSIBLE COLLUSION: A pedestrian walks by a Bank of America branch office this past January in San Francisco, California. Bank of America was one of four of the world's largest banks which were served subpoenas for possible colluding over LIBOR rates be (Justin Sullivan/Getty Images)
The world of deceit has not ended, with the latest charges being LIBOR [London Interbank Offered Rate] price rigging.

“Today the Wall Street Journal reported that Fed officials have been in contact with the British Bankers Association regarding potential manipulation of the LIBOR rate,” said Mark Sunshine in a May 2008 Sunshine Report, which is geared toward educating senior executives and investors.

Apparently, four of the world’s largest banks, Barclays PLC, Bank of America Corp., Citigroup Inc., and UBS AG were served subpoenas for possible colluding over LIBOR rates between 2006 and 2008.

The first to spot this hot news was Ms. Brooke Masters, chief regulation correspondent of the Financial Times (FT), who reported on it on March 24. She had stumbled on a short entry about LIBOR rate manipulation in the UBS 2010 annual report.

“UBS has received subpoenas from the SEC, the US Commodity Futures Trading Commission and the US Department of Justice in connection with investigations regarding submissions to the British Bankers’ Association, which sets LIBOR rates,” said UBS in its 2010 annual report.

UBS states that it is being investigated for manipulating LIBOR rates by those mentioned above, as well as Japan’s Financial Supervisory Agency.

UBS is not whitewashing or denying the accusation and says that it is carrying out an internal investigation and will cooperate with the authorities.

An Internet search of the U. S. Department of Justice, U.S. Securities and Exchange Commission (SEC), as well as the British Bankers’ Association (BBA), which is responsible for announcing the LIBOR rates, yielded nothing about the LIBOR rate rigging activities.

In two sections in its 2010 annual report, Citigroup alludes to having been served subpoenas by a number of regulatory and other governmental agencies, but does not go into detail.

“Citigroup continues to cooperate fully in response to subpoenas and requests for information from the Securities and Exchange Commission (SEC), FINRA, the Federal Housing Finance Agency …,” according to Citigroup’s 2010 annual report.

It is not clear at this time if others, such as Credit Suisse Group, Deutsche Bank AG, HSBC Holdings PLC, JPMorgan Chase & Co., Lloyds TSB Bank PLC, and The Royal Bank of Scotland Group, have been contacted by regulatory agencies in regard to manipulation of the LIBOR rate, according to the FT article.

The inquiry, which has been ongoing for around six months, focuses on those 16 banks that are providing the BBA daily input for the LIBOR rate calculation.

“All the panel members are believed to have received at least an informal request for information—an earlier stage in an investigative process before a subpoena,” according to the FT article.

FT tried, but regulators and bank spokespersons have either declined to comment or were inaccessible for questions.

The BBA advised FT that it stands behind those involved in providing input for LIBOR rates and that its calculation and mathematical approaches are clear and transparent.

“The BBA LIBOR setting process is reviewed annually by the Foreign Exchange and Money Markets Committee, a group of 13 active market practitioners who determine the membership of each panel (one for each of the 10 currencies covered) and review whether changes might be required in the setting process,” published the BBA on its website.

After the above paragraph, the BBA states that the last review was in May 2008.

Read More . . . Regulating LIBOR