Barclays Bank PLC and Barclays Capital Inc. today settled charges it had manipulated the Libor interest rate benchmark between 2005 and 2009, paying fines totaling $100 million to 43 states and the District of Columbia. The settlement made public on Monday resolves antitrust and other claims against the bank which “was pleased to have resolved the state investigations into legacy activities,” according to a Barclays spokesman.
“We believe this settlement is in the best interests of our shareholders and clients, and allows us to continue to focus on the future and serve our clients,” the spokesman added.
The fresh penalties would bring the total paid to authorities by banks to more than $10 billion.
Several government entities and not-for-profit groups in their states accused the banks of engaging in a conspiracy to rig the Libor and other benchmark interest rates. This led to defraud them in millions of dollars when they entered into swaps or other financial contracts based on Libor, without knowing that Barclays and other banks were working to manipulating the benchmark, according to a copy of the agreement announced Monday.
Attorneys general from multiple states led by New York and Connecticut launched their own probes in 2012 in the wake of those charges.
Another big scalp
Other banks that have reached settlements with the US authorities in similar Libor cases include UBS (UBSG.S), Royal Bank of Scotland (RBS.L), Deutsche Bank (DBKGn.DE) and ICAP (IAP.L). However, Barclays is the first to resolve Libor manipulation allegations from state attorneys general.
The bank neither admitted nor denied its findings, the authorities said on Monday, but it admitted to making inaccurate submissions during the financial crisis to disguise liquidity problems.
Barclays was also the first bank to settle with US and UK authorities over Libor-rigging. In 2012, the bank was fined $385 million in connection with Libor manipulation. In total, the Libor scandal has cost Barclays $453m as the British bank paid an additional $60 million criminal penalty for violating the non-prosecution agreement it signed. Furthermore, the settlement had led to resignation of the lender’s top leadership including its Chief Executive Officer Bob Diamond.
New York Attorney General Eric Schneiderman said in announcing the deal: “There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the fair functioning of financial markets”
“Libor manipulation were ongoing, and Barclays’s cooperation has been extensive and of substantial value in furthering the probes,” Schneiderman concluded.
In terms of the funds distribution, the authorities will use $93.35 million portion to pay restitution to agencies and organizations that lost money on Libor-linked products. The rest of the fund will be used to cover investigative costs and other uses.
Who lost out?
Libor stands for London Inter-Bank Offered Rate and basically it is used as the benchmark for trillions of loans, mortgages and financial products traded around the world.
Barclays and other banks trade in these products, so in attempting to fix the Libor rate, they submitted inaccurate rates in an effort to move to rig the market in its favour. As a result, they made bigger profits and traded at an advantage over others.
As part of its agreement with the Justice Department, Barclays admitted to wrongdoing that occurred between August 2005 and May 2008, when some of its traders called their counterparts at competing institutions and colluded to submit Libor rates that benefited their trading positions.
Last month, four former Barclays employees were sentenced to prison terms by a London court in connection with the same scheme.