US regulators summon seven banks over Libor scandal

Aug 16, 2012

Subpoenas for Barclays, HSBC and RBS prepare ground for investors to sue banks involved

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THE LIBOR scandal appears to be far from over after US authorities summoned seven banks, including HSBC and Royal Bank of Scotland, to answer more questions about allegations of rate fixing.
Last month Barclays was fined £290m by regulators on both sides of the Atlantic for manipulating the London inter-bank lending rate. It now faces another grilling alongside HSBC, RBS, Citigroup, Deutsche Bank, JPMorgan and UBS.
All seven have been issued with subpoenas by the attorney-generals of New York and Connecticut. "The pair want to examine whether banks colluded to fix interest rates determined by Libor, damaging the states' borrowers and investors as a result," explains the FT.
"The investigation is predicated on the assumption that at least one other bank must have colluded with Barclays in any attempts to manipulate Libor rates, which are used as a reference to price trillions of dollars of financial products," says the BBC.

"The US authorities will see whether supporting documents and testimony provide sufficient evidence for a criminal prosecution. Criminal charges could also bolster the strength of civil lawsuits by investors seeking damages for losses due to any rate-rigging."

In short, any bank involved can expect investors to sue.
Banking analyst Ralph Silva of SRN told The Daily Telegraph: "It's quite clear that over the past six months [US regulators] have put a tremendous amount of resources into this, and it looks like all those investigations are coming to a head right about now.
"There will be some turmoil in the banking industry over the next few months."
The Libor affair has already led to the resignation of Barclays chief executive Bob Diamond as well as chairman Marcus Agius, and earlier this month RBS confirmed it had sacked staff over the scandal.
The widening of the probe is bad news for the under-fire banking industry. Allegations relating to money laundering have been aimed at HSBC in the US Senate and this week Standard Chartered agreed to pay $340m to New York regulators over claims that it hid transactions with Iran.

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