Barclays (LSE: BARC.L - news) has been fined £290m for attempting to manipulate the world’s benchmarking borrowing rate in a blow to the bank’s reputation that has raised questions over the future of chief executive Bob Diamond.
The Financial Services Authority fined Barclays a record £60m, saying staff at the bank had repeatedly made false submissions to help set the London Interbank Offered Rate (Libor). The rate is used to fix the cost of borrowing on mortgages, loans and derivatives worth more than $450 trillion (£288 trillion) globally.
Investigators from the FSA and the US Commodity Futures and Trading Commission said they had found evidence that Barclays had tried to manipulate Libor for several years in the run up to the financial crisis and in its aftermath.
Barclays chief executive Bob Diamond, and three of the bank’s senior managers including finance director Chris Lucas, said they would not take bonuses this year as a result of the regulator’s findings.
However, one major shareholder said the move was insufficient and claimed senior executives should be forced to resign.
“Taking off a couple of million from Bob’s bonus isn’t enough. People should be considering resignations. This has happened under the board’s nose. Where is the accountability?” he said.
“The price setting mechanism of Libor is crucial to the integrity of the markets. This appears to have been put at risk. From the information I have, it looks inexcusable,” said Andrew Tyrie, chairman of the Treasury Select Committee.
Mr Tyrie added that the committee would summon Mr Diamond to explain what had happened.
Lord Oakeshott, a former Liberal Democrat Treasury spokesman, described the bank as “a casino that was rigging the wheels and loading the dice”. He added: “If Bob Diamond had a scintilla of shame, he would resign.”
Emails uncovered as part of a three-year investigation into claims that Barclays and other banks attempted to inflate and suppress Libor show the extent of the scandal.
In one message sent to a Barclays employee involved in the bank’s Libor submission, a trader asked for the rate to be set “as high as possible today”, to which the unnamed staff member replied “sure”.
In another, a trader from an unnamed rival bank thanks a Barclays trader for successfully getting the lender’s Libor rate lowered, saying: “Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.”
About a dozen banks are being investigated as part of the Libor probe, including state-backed lenders Lloyds Banking Group (LSE: LLOY.L - news) and Royal Bank of Scotland, as well as many of the largest US and European investment banks.
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“Although Barclays had particularly incriminating emails, this is by no means the end of the road on the Libor enquiry,” said Simon Hart, banking litigation partner at law firm RPC (Xetra: 869766 - news) .
“When a bank acts in its own self-interest by attempting to manipulate these rates for profit, or by submitting false reports that result from senior management orders to lower submissions to guard the bank’s reputation, the integrity of benchmark interest rates is undermined,” said Mr Meister.
Barclays has already dismissed several staff over Libor manipulation and is in the process of firing others linked to the false submissions.
Mr Diamond apologised for the bank’s actions and said he was “sorry that some people acted in a manner not consistent with our culture and values”.
Marcus Agius, chairman of Barclays, said: “The board takes the issues underlying today’s announcement extremely seriously and views them with the utmost regret. Since these issues were identified, the authorities acknowledge that Barclays management has co-operated fully with their investigations and taken, and continues to take, prompt and decisive action to correct them.”
Despite the fines and the potential for further legal action, Barclays shares closed up marginally at the end of Wednesday’s trading session at 194.16p, up 0.91pc.