Bloomberg News

Barnier Seeks to Widen EU Rules to Bar Libor Manipulation

July 08, 2012

European Union Financial Services Commissioner Michel Barnier said he plans to widen EU rules on market abuse to outlaw the manipulation of the London interbank offered rate.

“I’ll propose to widen the field of application to effectively cover the manipulation of indexes, which includes Libor,” Barnier said today in an interview in Aix-en-Provence, France.

Barclays Plc (BARC), the U.K.’s second-largest bank by assets, was fined 290 million pounds ($449.3 million) on June 27 for rigging Libor, a global benchmark, for profit. Chairman Marcus Agius, Chief Executive Officer Robert Diamond and Chief Operating Officer Jerry Del Missier subsequently resigned.

“Anyone thinking of manipulating markets needs to know they’ll face sanctions, including possibly criminal ones,” Barnier said.

Arlene McCarthy, the lawmaker leading work in the EU parliament on the draft law on market abuse, said last week she and Barnier discussed how the bloc’s rules should be extended to ensure that manipulation of interbank lending rates is treated as a criminal offense.

Criminal Probes

The U.K. Serious Fraud Office opened a criminal probe on July 6 and the U.S. Department of Justice is also investigating how derivatives traders and rate submitters colluded to rig interbank offered rates. The EU’s antitrust department is conducting a separate probe into Libor and Euribor, its equivalent in euros, rate manipulation.

As part of the U.S. and U.K. settlements, Barclays admitted rigging the London interbank offered rate, or Libor, and Euribor, as early as 2005. In testimony to the U.K. Parliament last week, Diamond apologized and said 14 Barclays traders were involved.

Citigroup Inc., Royal Bank of Scotland Group Plc, UBS AG, ICAP Plc, Lloyds Banking Group Plc and Deutsche Bank AG are among the lenders regulators are investigating. About 18 banks are surveyed as part of the process of determining Libor rates.

Libor and Euribor are calculated by a survey of banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies. Because submissions aren’t based on real trades, the potential exists for the benchmark to be manipulated by traders seeking to profit on where the rate is set.

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.net; Caroline Connan in London at cconnan@bloomberg.net

To contact the editor responsible for this story: Dick Schumacher at dschumacher@bloomberg.net


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