The probe of Libor manipulation is proving to be the tip of the iceberg as inquiries into assets from derivatives to foreign exchange show that if there’s a chance to rig benchmark rates in world markets, someone is usually willing to try.
Singapore’s monetary authority last week censured 20 banks for attempting to fix interest rate levels in the island state and ordered them to set aside as much as $9.6 billion. Britain’s markets regulator is looking into the $4.7 trillion-a-day currency market after Bloomberg News reported that traders have manipulated key rates for more than a decade, citing five dealers.
“Many bankers continue to behave as they did prior to the financial crisis,” said Mark Williams, a finance professor at Boston University who wrote “Uncontrolled Risk,” a book on the rise and collapse of Lehman Brothers Holdings Inc. “Banks and their regulators have to cap bank risk-taking behavior before meaningful change can occur. This is a global problem and not isolated to a few big banks. It’s very troubling.”
The probes into financial benchmarks began with Libor, which helps set rates on securities, loans, and even home mortgages. While UBS, Royal Bank of Scotland, and Barclays have paid fines, that investigation by U.S. and U.K. regulators is ongoing.