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Libor Scandal: British Banks Face US Inquiry

(c) Sky News 2012

Three British banks are to be questioned in the US over alleged manipulation of the Libor benchmark international lending rates.

New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen have been looking into the possible rigging and manipulation of Libor by global banks for months.

As part of that investigation, they have issued summons to Barclays (LSE: BARC.L - news) , HSBC (LSE: HSBA.L - news) and Royal Bank of Scotland (LSE: RBS.L - news) , as well as four other banks - Citigroup (NYSE: C - news) , Deutsche Bank (Xetra: 514000 - news) , JPMorgan Chase (Hanover: 850628 - news) , and UBS (NYSEArca: DJCI - news) , a source said.

They face hefty fines and legal costs if misconduct is found.

Barclays has already been fined £290m by British and US authorities.

Libor, or the London Interbank Offered Rate, is the lending rate that affects mortgages and loans.

The Government has commissioned a review into the Libor-setting system which could result in the controversial rate being replaced.

Martin Wheatley, the City financier tasked with reviewing Libor, has suggested the setting of the rate could be overseen by a new independent body in future rather than the British Bankers' Association.

He has also proposed the introduction of criminal sanctions against those attempting to manipulate Libor.

Of the three British banks which are said to have received subpoenas, both RBS and HSBC told Sky News they were co-operating with investigations.

Barclays declined to comment.