New York Attorney
General Eric Schneiderman has announced a $100 million, 44-state settlement
with Barclays Bank and Barclays for “fraudulent and anticompetitive conduct” involving
the manipulation of USD Libor (London Interbank Offered Rate) and other
benchmark interest rates.
During the period of
investigation, a panel of 16 banks made USD Libor submissions that were
supposed to reflect borrowing rates in the interbank market. A daily Libor rate
was calculated by averaging the middle eight submissions. “The investigation
found that, at times during the financial crisis period, roughly from
2007-2009, Barclays managers told Libor submitters to lower their Libor settings
to avoid the appearance that Barclays was in financial difficulty and needed to
pay more than some of its competitors to borrow money,” Schneiderman says. “The
Libor submitters complied with the instructions and suppressed their Libor submissions.
Also, from 2005 to 2007 and continuing at least into 2009, Barclays’ traders at
times asked Barclays’ Libor submitters to change their Libor settings in order
to benefit the traders’ positions, and the submitters often followed through on
the requests, instead of setting Libor based on Barclays’ borrowing costs.
believed that other banks’ Libor submissions likewise did not reflect their
true borrowing rates, and that therefore, published Libor did not reflect the
cost of borrowing funds in the market, as it was supposed to do,” he adds.
states that government entities and not-for-profit organisations in New York
and throughout the US, among others, were defrauded of millions of dollars
when they entered into swaps and other financial contracts with Barclays
without knowing that Barclays and other banks on the USD Libor-setting panel
were manipulating Libor – a price component – and, at times, colluding with
It says that these
entities with Libor-linked swaps and other investment contracts with Barclays
will be notified if they are eligible to receive restitution from a
settlement fund of $93.35 million. The balance of the settlement fund will be
used to pay expenses of the investigation and for other uses consistent with
Barclays is the first USD
Libor-setting panel bank under investigation by the State Attorneys General to
resolve the claims against it. The investigation into the conduct of several
other USD LIBOR-setting panel banks is ongoing.
“There has to be one
set of rules for everyone, no matter how rich or how powerful, and that
includes big banks and other financial institutions that engage in fraud or
impair the fair functioning of financial markets,” saysSchneiderman. “As a result of
Barclays’ misconduct, government entities and not-for-profits were defrauded of
funds that otherwise could have been used to benefit the people of New York.”