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Britain opens formal criminal investigation into Libor scandal

6th Jul 2012, 12:06 pm by Deborah Sterescu
Britain opens formal criminal investigation into Libor scandal

Britain's Serious Fraud Office announced Friday it would formally begin a criminal investigation into allegations that banks attempted to rig Libor, an important interest rate benchmark.

Libor, the London interbank offered rate, is used to price financial instruments around the globe. It is a global market benchmark published by the British Bankers’ Association (BBA) based on a survey of what banks tell its compilers they have to pay to borrow from their peers, in various currencies and for different periods.

UK bank Barclays (LON:BARC) (NYSE:BCS) last week paid around $450 million in fines to settle a probe by U.S. and British regulators for attempting to rig interbank lending rates, a scandal that has seen three senior officials of the bank resign, including CEO Bob Diamond.

During Diamond's testimony to Parliament, he said he was “physically ill” upon learning of the actions of Barclays traders, which led to the Libor rate-rigging that cost the bank a record £290 million in fines. He also said the bank has been scapegoated in the global scandal that involves some of the world's biggest lenders, because it was the first financial institution to settle.

He sought to separate the actions of a small minority of traders from the “hard work” by thousands of Barclays workers, adding that these traders “were acting on behalf of themselves”, not for the bank’s benefit.

MPs grilled the former bank boss Wednesday over a 2008 memo in which Diamond implied the Bank of England or government officials gave Barclays the green light to lower its lending rates to make its financials seem more robust.

Recently appointed chief operating officer, Jerry del Missier, also quit Tuesday, as well as chairman Marcus Agius earlier this week, but Agius is staying on to lead the search for a new CEO.

The incidents are alleged to have happened from 2005 through 2009 and Barclays has admitted to submitting falsely low estimates from late 2007 to May 2009, while Diamond was at the helm.

The UK's chancellor George Osborne said Barclays was “not alone” in its guilt of fixing the interest rates at which banks lend to each other.

The chancellor said four global banks are also being investigated: UBS, (NYSE:UBS) HSBC (LON:HSBA) Citigroup (NYSE:C) and Royal Bank of Scotland (LON:RBS).

Britain's FTSE 100 closed down 0.53% Friday.

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