Who’s Next in Libor Spotlight?

Investigation of interest-rate manipulation has touched up to 18 financial institutions.

Barclays Plc’s settlement of about $451 million with U.S. and U.K. regulators last week offered the first glimpse of what banks may have to pay to resolve a global probe of interest-rate manipulation. The question now is who’s next.

The two-year investigation, which involves regulators on three continents, has touched as many as 18 financial institutions that help set London and Tokyo interbank offered rates for dollars, euros and yen. That number includes as many as 12 firms that have fired or suspended traders in connection with related internal probes of whether their employees tried to manipulate the rates known as Libor and Tibor.

False Rates

The investigations focus on whether banks reported false rates in an attempt to hide their true cost of borrowing during the financial market turmoil of 2008, and whether traders colluded to rig the benchmark to profit from interest rate derivatives.

Canadian Regulators

According to documents filed in the Ontario Superior Court in May 2011, lawyers for UBS gave information to Canadian regulators, including details of the lender’s own internal probe. Based on UBS’s information, the regulator said HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Deutsche Bank AG, JPMorgan Chase & Co., Citigroup Inc., as well as brokers at ICAP Plc and RP Martin Holdings Ltd. colluded to manipulate the yen Libor rate.

Traders Disciplined

Several firms have disciplined traders involved in the conduct.

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