US regulator, the Securities and Exchange Commission (SEC) has handed out subpoenas to more banks over alleged manipulation of the LIBOR rate, the wholesale rate at which banks lend to each other.

US regulator, the Securities and Exchange Commission (SEC) has handed out subpoenas to more banks over alleged manipulation of the LIBOR rate, the wholesale rate at which banks lend to each other.

Barclays, Citigroup and Bank of America are now being investigated by US regulators - as well as authorities in the UK and Japan.

They will assess whether the banks submitted artificially low borrowing costs to the British Banking Association, which calculates LIBOR, between 2006 and 2008.

UBS, the Swiss banking giant, revealed yesterday that it was under investigation for its “improper attempts... to manipulate LIBOR rates at certain times”, the lender said in its annual results.

To calculate the rate, the BBA pools together data from panel banks received at 1100 daily. The rates are ranked, and the middle two quartiles are then averaged to create the LIBOR for that day.

The effectiveness of the LIBOR system has come into question in recent years, as it is thought not to reflect the true lending rates in the market as panel banks could easily report inaccurate data.

LIBOR, the London InterBank Offered Rate, is the basis for settlement of interest rate contracts on many of the world’s major futures and options exchanges.