U.S. authorities have reached a US$100 million settlement with Barclays in connection with alleged LIBOR manipulation. Cases against other banks may follow.
Barclays agreed to the deal with 44 state attorneys general, led by New York and Connecticut, to resolve allegations of “fraudulent and anticompetitive conduct involving the manipulation” of U.S. LIBOR and other interest-rate benchmarks.
The states say their investigation found that during the global financial crisis of 2008-09, the bank’s LIBOR submitters were told to lower their settings “to avoid the appearance that Barclays was in financial difficulty and needed to pay more than some of its competitors to borrow money.” Additionally, they say, traders asked submitters to change their LIBOR settings in order to benefit their trading positions.
The deal includes a US$93.4 million settlement fund, which will be used to pay restitution to eligible investors who held LIBOR-linked swaps and other investment contracts with Barclays and who were harmed by the manipulation. The bank also must pay US$6.3 million to the states and US$350,000 to cover administration of the fund.
The states note that Barclays is the first of several banks under investigation over their LIBOR settings, and that it cooperated with the authorities from the outset.
“There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the fair functioning of financial markets,” said New York’s attorney general, Eric Schneiderman, in announcing the settlement. “As a result of Barclays’ misconduct, government entities and not-for-profits were defrauded of funds that otherwise could have been used to benefit the people of New York.”