Sunday, July 15, 2012

(BN) Libor Probe May Yield U.S. Charges by September

Libor investigations on both sides of the Atlantic intensified as Barclays Plc (BARC) traders could face possible U.S. charges by September and British lawmakers may use hearings this week to expand their inquiry to other banks tied to the global financial scandal.

Barclays traders involved in allegedly manipulating Libor rates between 2005 and 2007 may be charged by U.S. prosecutors before the Labor Day holiday on Sept. 3, said a person familiar with the Justice Department investigation in Washington.

In London, Financial Services Authority Chairman Adair Turner will appear today with Andrew Bailey, head of U.K. banking supervision, and Tracey McDermott, the agency's acting enforcement chief, at a parliamentary hearing where lawmakers may seek to elicit information on how the regulator is expanding its probe beyond Barclays.

"What they'd probably like to know from the FSA is what other investigations are in progress and what stages they're at," Ian Mason, a former director of the regulator's enforcement division and now an editor at the Practical Law Co., said in a telephone interview in London.

Confidence in the London interbank offered rate, or Libor, a benchmark for financial products valued at $360 trillion worldwide, has been dented by Barclays's admission that it submitted false rates. Robert Diamond, who resigned as Barclays' chief executive officer after the bank was fined 290 million pounds ($448 million), told British lawmakers this month that other banks also low-balled submissions.

Additional Banks

Royal Bank of Scotland Group Plc, UBS AG, Lloyds Banking Group Plc (LLOY) and Deutsche Bank AG are among the lenders regulators in Europe, Asia and the U.S. are investigating.

U.S. prosecutors, in the late stages of negotiating agreements with other banks that may have rigged Libor rates, might produce a deal to match the Barclays accord before any individual charges are filed, said the person familiar with the American investigation, who asked not to be identified because the probe is confidential.

The surprise negative reaction to the Barclays deal and the resignations of Diamond, chairman Marcus Agius and Chief Operating Officer Jerry Del Missier, may slow down Libor negotiations with additional global banks, the person said.

Senior executives at other banks may question the wisdom of full cooperation with U.S. prosecutors given what happened at Barclays, the person said.

Other Agreements

Barclays had hoped to reach a multibank agreement with regulators in the U.K. and U.S., said a person familiar with those negotiations. The U.S. Commodities Futures Trading Commission insisted that the Barclays agreement move forward as soon as it was ready, rather than wait until the probes involving other banks were completed, said the individual, who declined to be identified because the talks were private.

Ellen Davis, a spokeswoman for the Justice Department in New York, and Steven Adamske, a spokesman for the CFTC in Washington, declined to comment on the probes.

More Libor settlements could happen "before the end of the year," the FSA's Turner said at the regulator's annual conference this month. How quickly that happens depends on the "cooperation of firms and their willingness to settle."

The FSA officials will be "very reluctant to identify institutions, but could come under some pressure from the committee," Mason said.

Best Paid

Diamond, who was Britain's best-paid bank CEO, opted to forgo deferred bonuses valued at as much as 20 million pounds when he stepped down following the public and political outcry at Barclays's role in the Libor scandal. The bank's shares have fallen 18 percent since the June 27 settlement with regulators.

Jerry Del Missier, the bank's former chief operating officer who also lost his job in the wake of the Libor scandal, will appear at the committee at 4 p.m. today, before the FSA officials.

Conservative lawmaker Andrew Tyrie's Treasury Select Committee has grilled Diamond, Agius and Bank of England Deputy Governor Paul Tucker since the fine.

Tucker was questioned about his involvement in a 2008 phone call with Diamond that suggested he hinted that London-based Barclays should lower its Libor submissions. The 54-year-old told lawmakers that the Libor investigation unveiled a "cesspit" in the City of London.

Libor is derived from a survey of banks conducted each day on behalf of the British Bankers' Association in London. Lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs. After a set number of quotes are excluded, those remaining are averaged and published for each currency by the BBA before noon.

A total of 18 banks are surveyed as part of the process of determining U.S. dollar Libor.

The U.K. Serious Fraud Office opened a criminal probe into the attempted rigging of interest rates that led to the record fine against Barclays. SFO Director David Green said he had decided to "accept the Libor matter for investigation" in an e-mailed statement July 6.

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