Sunday, July 15, 2012

US building criminal case against Barclays

The United States Justice Department could initiate criminal proceedings against financial institutions and individuals at the centre of Libor manipulation scandal. Several authorities within and outside US, including private investors’ lawsuits, are currently investigating the role of banks, including Barclays and its employees into the scandal.

The focus of the investigations is how the banks ‘set’ the London interbank offered rate (Libor), the benchmark rate which is used by banks when they give loans to each other. The Libor eventually determines the ‘cost’ or the interest rate of other loans and financial products such as mortgages and credit cards.  

According to New York Times, the US can officially charge one or more banks by the end of this year. It is highly likely that Barclays and some of its traders will receive the first blow. Analysts are expecting the Switzerland based UBS to become the focus of investigations in the near future. Other banks that are also embroiled in the scandal include Citigroup, JPMorgan & Chase and Deutsche Bank.

This could deliver a significant blow to the global banking sector as criminal and civil lawsuits could lead to penalties extending to several billion dollars. A government official who was involved in the case was quoted as saying, “It’s hard to imagine a bigger case than Libor,

Since the investigations are currently underway therefore no official word has come out yet. The New York Times has reported unnamed government official as the source of information.

Barclays was slapped with a $450 million fine by US and UK authorities over rate rigging, but its employees can still be charged for criminal wrongdoings. In the meanwhile, other financial institutions that are currently being investigated are trying to reach a settlement with US authorities in order to avoid criminal proceedings.  

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