After Barclays, other banks are in our sights over interest rates, warns FSA

<p>The Financial Services Authority has warned the banking industry that the record-breaking £59.5m fine levied on Barclays for attempting to manipulate interest rates might not be the last as an international investigation into the activities of other banks is being continued. Tracey McDermott, acting director of enforcement and financial crime at the City regulator, said that a "number of other significant cross-border investigations in this area" were under way involving other banks. "The action against Barclays should leave firms in no doubt about the serious consequences of this type of failure," she said. The bailed-out banks Lloyds Banking Group and Royal Bank of Scotland are among those co-operating with the authorities. The total fines levied against Barclays reach £290m when penalties to settle actions with the US department of justice and Commodity Futures Trading Commission (CFTC) are included. They follow an investigation of the activities of its traders in London, New York and Tokyo. Bob Diamond, the chief executive of Barclays, insisted that the events "fell well short of the standards to which Barclays aspires in the conduct of its business". "When we identified those issues, we took prompt action to fix them and co-operated extensively and proactively with the authorities," Diamond said in a statement. He and the chairman Marcus Agius spoke to shareholders to try to reassure them about the impact of the affair, which could have resulted in an £85m fine from the FSA if the bank had failed to co-operate. One investor said: "The company needs to urgently convince shareholders that this is not symptomatic of wider ethical business failures." Barclays refuses to disclose how many employees were caught up in the affair and how many have left or face disciplinary action, although it is known that some employees connected to the affair have left. The account of the long-running saga provided by the CFTC showed that Barclays attempted to manipulate, and made false reports concerning, two global benchmark interest rates "on numerous occasions and sometimes on a daily basis over a four-year period, starting as early as 2005". The benchmarks referred to are the London interbank offered rate (Libor) and the Euro interbank offered rate (Euribor). They are used by the financial industry to set the rates of interest that households and major companies pay to borrow. Banks are asked which rate they think they will be able to borrow from each other for periods of time ranging from overnight to 12 months in currencies including sterling, US dollars, euros, yen and Swiss francs. The rates are then submitted to the British Bankers' Association which publishes the "fix" each day. The actions against Barclays show how crucial the rate became during the financial crisis when the management of the bank was worried about the negative publicity surrounding the higher rates it was submitting compared with its rivals. In October 2008, in the days before other banks were bailed out, a "submitter" – one of the Barclays traders responsible for submitting rates – remarked that "manager E asked me to put it lower than it was yesterday … to send the message that we're not in the shit". The FSA admits that a miscommunication may have occurred after a conversation between Barclays management and the Bank of England. "No instruction was given to Barclays to lower its Libor submission during this telephone conversation. However, as the substance of the telephone conversation as relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred. This meant that Barclays submitters believed mistakenly that they were operating under an instruction from the Bank of England to reduce Barclays' Libor submissions." The other part of the offence relates to the breakdown in systems controls at Barclays that allowed interest rate traders to work with "submitters" to make the rates suit the traders' and the bank's purposes. It was not until 20 May 2009 that requests to submitters were rebuffed by an email that said: "Sorry I can't do that – compliance would have a real issue with that." The impact went far beyond London. David Meister, the CFTC's director of enforcement, said: "The American public and our markets rely upon the integrity of benchmark interest rates such as Libor and Euribor because they form the basis for hundreds of trillions of dollars of transactions." Chris Leslie, the shadow Treasury minister, said that the regulation of Libor arrangements now needed to be reviewed. "We need to know what the government plans to do to prevent traders manipulating the independent interest rates between the banks for their own advantage." said Leslie.</p>

After Barclays, other banks are in our sights over interest rates, warns FSA

The Financial Services Authority has warned the banking industry that the record-breaking £59.5m fine levied on Barclays for attempting to m...

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