Bloomberg News

Libor Fixers May Face Jail in Future Under EU Market-Abuse Plan

July 24, 2012

Bank staff found guilty of future attempts to rig interbank lending rates may face jail under European Union plans to prevent any repeat of the global scandal engulfing Libor.

The European Commission, the 27-nation EU’s executive arm, will propose tomorrow that manipulation of Libor, Euribor and other so-called market indices should be subject to criminal sanctions, the authority said in an e-mailed statement. The move comes as regulators worldwide review the governance and setting of interbank rates.

The plans “will ensure that direct manipulation of benchmarks will be a criminal offense,” Alejandro Ulzurrun, a spokesman for the Brussels-based authority, told reporters today. “Attempted manipulation” would be punishable by fines and other administrative sanctions, the commission said.

Confidence in Libor, a benchmark for financial products valued at $360 trillion worldwide, has been shaken by Barclays Plc (BARC)’s admission that it submitted false rates. Robert Diamond, who resigned as London-based Barclays’s CEO after the bank was fined 290 million pounds ($451 million), told British lawmakers this month that other banks also lowballed Libor submissions.

The Barclays fine has provoked renewed calls for tougher oversight of the financial system and pushed regulatory probes of interbank lending rates to the top of the political agenda.

The scandal has provoked public “fury about values” in the financial industry, Adair Turner, chairman of the U.K. Financial Services Authority, said in a speech at the Bloomberg offices in London today.

Interbank lending rates are used as a benchmark throughout the financial system for fixing interest rates on other products, including consumer loans and mortgages.

To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net;

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net;


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