Britain’s Serious Fraud Office to probe rate-fixing scandal

LONDON: Britain’s Serious Fraud Office said Friday it would formally investigate a bank rate-fixing scandal which has prompted three Barclays executives to quit and dented London’s reputation as a top financial center.
“The SFO director David Green QC has today decided formally to accept the Libor matter for investigation,” it said.
An SFO spokeswoman confirmed that a dedicated team has now started work on the case but would not comment on who specifically was under investigation.
Three senior Barclays executives including CEO Bob Diamond have resigned this week over the row.
Libor (London Interbank Offered Rate), the rate at which banks lend to one another, plays a key role in global markets, affecting what banks, businesses and individuals pay to borrow money.
Last week, Barclays was fined £290 million ($452 million, 360 million euros) by British and US regulators for the attempted rigging of Libor and Euribor, its eurozone equivalent.
The SFO subsequently said Monday that it was “considering whether it is both appropriate and possible to bring criminal prosecutions.”
It is responsible for investigating and prosecuting serious and complex fraud in Britain and Friday’s announcement appears to bring the prospect of criminal charges in the case a step closer.
The SFO has not specified which banks will be covered by its investigation, but a probe by Britain’s Financial Services Authority regulator which culminated in the Barclays fine also highlighted malpractice at other banks.
Royal Bank of Scotland revealed this month that it sacked four traders in 2011 over attempted rate-fixing.
Questions have also emerged over whether Britain’s central bank, the Bank of England (BoE), may have encouraged Barclays to manipulate the rates.
Barclays this week released a written account by Diamond of a telephone conversation he had with BoE deputy Paul Tucker about the rates in 2008.
According to Diamond, Tucker suggested in the phone call that “it did not always need to be the case that (Barclays rates) appeared as high as we have recently.”
Diamond said Barclays chief operating officer Jerry del Missier, who has also resigned over the debacle, interpreted this as an instruction to rig the rates, though he himself did not.
Tucker, who is widely regarded as a possible successor to the BoE’s Governor Mervyn King, will appear on Monday before parliament’s Treasury Select Committee to give his version of events.
This is the same panel of lawmakers that grilled Diamond over the scandal on Wednesday.
In defiant form before the committee during a three-hour hearing, Diamond acknowledged there had been “reprehensible” behavior at the bank but said swift action had been taken to tackle it.
“I’m sorry, I’m disappointed and I’m also angry,” the American banker told lawmakers.
“Clearly there were mistakes, clearly there was behavior that was reprehensible.”
But he added: “The attitude of Barclays three years ago when this was recognized was, let’s get to the bottom of it.”
He and del Missier quit on Tuesday over the controversy, which has also prompted Barclays chairman Marcus Agius to resign.
Ratings agency Standard and Poor’s downgraded Barclays’ long-term outlook to negative from stable on Thursday following Diamond’s resignation.
Putting the rating outlook on negative usually means it is at risk of being downgraded in the future, a move which can increase financing costs for the company affected.
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