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Seven banks face U.S. libor questioning

Thursday, August 16, 2012 - 02:14

Aug. 16 - JPMorgan, Deutsche Bank and HSBC are among around seven banks subpoenaed in a joint New York-Connecticut investigation of possible manipulation of the Libor benchmark international lending rates. Ciara Sutton reports

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The Libor scandal is going global. Some of the worlds biggest banks have reportedly been subpoenaed by a U.S. investigation into interest rate rigging. Sources have told Reuters that RBS, HSBC, JPMorgan, and Barclays will need to give evidence to authorities in New York and Connecticut. UBS, Deutsche Bank, and Citigroup are also apparently on the list. The subpoenas seek documents relating to possible collusion at the highest level, in alleged rate manipulation. The latest action, says Mediobanca's Christopher Wheeler, could lead to a wave of multi-million dollar settlements. (SOUNDBITE) CHRISTOPHER WHEELER, SAYING: "The thing about the New York attorney general is that he has this power called the Martin's Law which dates back to 1921 which means they can investigate without having any proof of intention of committing fraud. As Standard Chartered found out recently, they can go in without having full evidence on their side and have a look around. And that obviously can be very powerful in terms of what settlements are reached." The London interbank offered rate is compiled by a handful of big banks. It's an estimate of how much they think they need to pay to borrow from each other. As the world's benchmark interest rate, it influences the cost of loans, ranging from mortgages to credit cards. Barclays was fined 450 million dollars in June by British and U.S. authorities for manipulating the rate. It also led to the resignation of both its chairman and CEO. (SOUNDBITE) CHRISTOPHER WHEELER, SAYING: "If that were to be reoccurred in the other banks, that would be quite damaging to the industry. And it is very difficult to know, it depends on the scale of the fines and the scale of the evidence found against those banks." Authorities around the world have launched investigations into the alleged rigging. In the UK, a government-ordered review into Libor is being conducted by the Financial Services Authority, which described the current Libor system as "no longer viable". And there could be further bad news for the banks if criminal charges are brought, potentially leading to civil lawsuits from investors seeking damages for losses due to any rate-rigging. Ciara Sutton, Reuters.

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Seven banks face U.S. libor questioning

Thursday, August 16, 2012 - 02:14