By Erica Reed
December 12th, 2012 11:00am
Libor, short for the London Interbank Offered Rate, is considered to be one of the most crucial interest rates in finance. It’s used to price a huge range of financial contracts, including some mortgages. The Libor scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Authorities in the United States and elsewhere are investigating at least 16 banks for the rigging of Libor rates.
In July 2012, Barclays agreed to pay $453 million to settle allegations by US and British authorities that the British bank tried to manipulate Libor. Barclays is the only bank to have been fined for attempting to rig Libor, but RBS and UBS are thought to be close to reaching their own settlements. More than a dozen other banks are being investigated, including Lloyds Banking Group and HSBC.
On Tuesday, the UK’s Serious Fraud Office made its first arrests in connection with its probe into attempts by city traders to fix Libor interest rates. The Serious Fraud Office said the three British nationals, aged 33, 41 and 47, were questioned at a London police station and that authorities searched their homes near London. All three men detained are understood to have been involved in trading connected to Yen Libor, the benchmark Japanese borrowing rate.
David Green, the director of the Serious Fraud Office, said in an interview last month the agency was considering conspiracy-to-defraud charges against individuals. Green said the agency is focusing on the most egregious attempts to manipulate Libor and other related rates.
The Libor scandal has further eroded the reputation of the banking industry, already shaken by the financial crisis of 2008 and a series of massive trading losses.
Erica Reed is an associate attorney at Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, P.A. She is a member of the Business Torts Department of the firm. Her practice focuses primarily upon representing individuals and entities in the areas of securities litigation and arbitration, as well as complex business and antitrust litigation.
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