LIBOR Oversight-Related Changes Announced by FSA Chief

Britain’s Financial Services Authority managing director Martin Wheatley says that oversight of Libor should become the UK regulator’s job. He made his statements on Friday, proposing that over 100 Libor rates tied to maturities and currencies that lack enough trading information to be set properly should be eliminated right away. He also said that submissions by banks should be grounded in “hard data.”

Questions were raised about the London Inter-Bank Offer Rate’s accuracy a few months ago following allegations that Barclays (BCS) and other large banks had been rigging it by turning in borrowing estimates that were artificially low. Considering that LIBOR is the average borrowing cost for banks in Britain for when they are lending each other money, as well as a benchmark interest rate that impacts financial contracts and corporate loans globally, such manipulation cannot happen. Barclays later admitted that it had tried to rig rates to boost its own derivative trading, hide actual lending costs, and create the impression of better financial health during the economic crisis. The bank would go on to settle over these securities allegations: $453 million to the FSA, $200 million to the Commodity Futures Trading Commission, and $160 million to the US Department of Justice. However, several other banks are still under investigation related to the LIBOR scandal.

“Many regional banks and other financial institutions are seeking to recover losses based on fraudulently manipulated Libor rates,” said Securities Fraud Attorney William Shepherd. “Most lenders have abandoned the ‘prime’ rate formula and now base their rates on the widely accepted (and trusted) Libor rate. Our law firm represents financial institutions in claims for damages.”

Acknowledging that Libor governance has been a complete failure, Wheatley, who is expected to become the Financial Conduct Authority’s chief executive when the FSA breaks up into two agencies, acknowledged that inadequate regulation and a “comprehensive mechanism” to retaliate against those that attempt to “manipulate the system” has made resulting problems worse. He wants FSA to be given additional authorities, including vetting power over rate-submitters and the ability to prosecute rate manipulation efforts.

According to, with regulatory actions and securities litigation over the LIBOR manipulation scandal growing every day, through the first week of September it had counted 88 actions against 20 banks—that’s 20 regulatory probes and 68 complaints. Among the defendants, besides Barclays, are JP Morgan Chase Bank (JPM), Citibank (C), Royal Bank of Scotland Group (RBS), Bank of America (BAC), Credit Suisse Group AG (CS), UBS (UBS), HSBC, Deutsche Bank AG (DB), Bank of Tokyo Mitsubishi, Royal Bank of Canada (RY), and others. More actions over pension fund losses are likely.

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“>FSA to Oversee Libor in Streamlining of Tarnished Interest Rate, SF Gate, September 28, 2012

88 & Counting: Pension Fund Suits Next For LIBOR?, Advisen, September 27, 2012

More Blog Posts:
SEC Reviewing LIBOR-Related Disclosures by Issuers, Institutional Investor Securities Blog, August 10, 2012

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

Insider Trading Roundup: SEC Settlement Reached Over Alleged Tips In Insurers’ Merger, Court Won’t Throw Out Criminal Charges Related to Info From AA Member, & Asset Freeze Approved Against Broker In Burger King Acquisition, Stockbroker Fraud Blog, September 28, 2012

Contact Shepherd Smith Edwards and Kantas, LTD, LLP to explore whether you have cause for an institutional investment fraud case related to the LIBOR scandal.