Barclays rate rigging scandal to be investigated by Serious Fraud Office

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By Andrew Barr
 
An investigation into the rigging of inter-bank lending rates has been launched by the Serious Fraud Office (SFO) following the Libor scandal which resulted in a record fine for Barclays.
 
£290m in penalties was paid out by Barclays bank last week.  Criminal charges could further be brought against individual traders, not only in association with Barclays but across the wider market.

On Monday the Serious Fraud Office said it was considering “whether it is both appropriate and possible” to bring criminal prosecutions, but a spokesperson has now confirmed that a dedicated case team has started work.

However, an SFO spokesperson refused to reveal which individuals the team would be investigating.

In a very short statement on its website, the SFO said only: “The SFO Director David Green QC has today decided formally to accept the LIBOR matter for investigation.”

The Libor scandal has so far led to the resignation of three Barclays senior executives, including the chief executive Bob Diamond who has become the focal point for debate on ethical banking.

Mr Diamond said he had felt “physically ill” at the discovery of rate-rigging and insisted he was not “personally culpable” for the actions of other Barclays staff.

The former head is estimated to have received £120 million since joining Barclays’ board in 2005.

“Bob Diamond has been downgraded to Bob Diamante,” joked his daughter on Twitter.

Regulators from the UK and USA had found that rates had tried to be rigged for a number of years, initially for the generation of profit and latterly to prevent suspicions that the banks were in financial difficulty during the recession.

However there were revelations this week that the UK authorities, including the British Bankers’ Association, which regulates LIBOR, were warned at least five times that there were issues with the way the London rate was being set.

The SFO takes decisions whether or not to prosecute individuals depending on several criteria including the level of public concern and whether the value of the fraud is over £1m.

At this week’s Treasury Select Committee, Bob Diamond said: “I understand that there will be follow-up criminal investigations on certain individuals … It’s not up to us, but we are certainly not going to stand in the way of it”.

The Chief Secretary to the Treasury, Danny Alexander, said he was “delighted” by the SFO’s decision to lead an investigation.

He said: “As a government, we will make sure the SFO has all the resources it needs to conduct this investigation in full.

“I want the SFO to follow the evidence wherever it goes, to bring prosecutions if they can.”

Meanwhile, Chancellor George Osborne has announced that bankers could face imprisonment due to new laws being rushed through Westminster to deal with the crisis.

Mr Osborne this week claimed that Labour Ministers in Gordon Brown’s cabinet “were involved” in the scandal, naming former Treasury Minister Ed Balls. 

However the UK Chancellor appeared to back down after heated exchanges in the House of Commons, with aides reporting that Mr Osborne accepted Mr Balls was not the Treasury Minister referred to in an internal Barclays’ memo that cited “senior” Whitehall Officials.

The memo, written by Bob Diamond described Mr Diamond’s recollections of telephone conversations with Bank of England deputy Paul Tucker in which the BoE official suggested the high level of Barclays’ LIBOR rate was causing senior Whitehall officials concern.

Mr Tucker is to appear before the committee next week after making a special request to do so.

The week has also seen former Labour Chancellor Alistair Darling admit that the last Labour Government were concerned in 2008 that the LIBOR rate was too high and attempted to manipulate it down through what Mr Darling described as ‘policy changes’.

Labour has come under pressure from the SNP to clarify what Ministers knew and when they were informed.  A series of ten questions have been published by the nationalists who are calling for full transparency into the scandal which took place when Labour were in power.