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The letter
''B'' of the signage on the Barclays headquarters in Canary Wharf
is hoisted up
the side of the building in London July 20, 2012. (Credit: Reuters/
Simon
Newman)
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(Reuters) -
U.S. prosecutors and European regulators are close to arresting individual
traders and charging them with colluding to manipulate global benchmark
interest rates, according to people familiar with a sweeping investigation into
the rate-rigging scandal.
Federal
prosecutors in Washington, D.C., have recently contacted lawyers representing
some of the individuals under suspicion to notify them that criminal charges
and arrests could be imminent, said two of those sources who asked not to be
identified because the investigation is ongoing.
Defense
lawyers, some of whom represent individuals under suspicion, said prosecutors
have indicated they plan to begin making arrests and filing criminal charges in
the next few weeks. In long-running financial investigations it is not uncommon
for prosecutors to contact defense lawyers for individuals before filing
charges to offer them a chance to cooperate or take a plea, these lawyer said.
The
prospect of charges and arrests of individuals means that prosecutors are
getting a fuller picture of how traders at major banks allegedly sought to
influence the London Interbank Offered Rate, or Libor, and other global rates
that underpin hundreds of trillions of dollars in assets. The criminal charges
would come alongside efforts by regulators to punish major banks with fines,
and could show that the alleged activity was not rampant in the banks.
"The
individual criminal charges have no impact on the regulatory moves against the
banks," said a European source familiar with the matter. "But banks
are hoping that at least regulators will see that the scandal was mainly due to
individual misbehavior of a gang of traders."
In Europe,
financial regulators are focusing on a ring of traders from several European
banks who allegedly sought to rig benchmark interest rates such as Libor, said
the European source familiar with the investigation in Europe.
The source,
who did not want to be identified because the investigation is ongoing, said
regulators are checking through emails among a group of traders and believe
they are now close to piecing together a picture of how they allegedly
conspired to make money by manipulating the rates. The rates are set daily
based on an average of estimates supplied by a panel of banks.
"More
than a handful of traders at different banks are involved," said the
source familiar with the investigation by European regulators.
There are
also probes in Europe concerning Euribor, the Euro Interbank Offered Rate.
It is not
clear what individuals and banks federal prosecutors are most focused on. A top
U.S. Department of Justice lawyer overseeing the investigation did not respond
to a request for a comment.
Reuters
previously reported that more than a dozen current and former employees of
several large banks are under investigation, including Barclays Plc, UBS and
Citigroup, and have hired defense lawyers over the past year as a federal grand
jury in Washington, D.C., continues to gather evidence.
The
activity in the Libor investigation, which has been going on for three years,
has quickened since Barclays agreed last month to pay $453 million in fines and
penalties to settle allegations with regulators and prosecutors that some of
its employees tried to manipulate key interest rates from 2005 through 2009.
Barclays,
which signed a non-prosecution agreement with U.S. prosecutors, is the first
major bank to reach a settlement in the investigation, which also is looking at
the activities of employees at HSBC, Deutsche Bank and other major banks.
The
Barclays settlement sparked outrage and a series of public hearings in Britain,
after which Barclays Chief Executive Bob Diamond announced his resignation from
the big British bank.
The
revelations have raised questions about the integrity of Libor, which is used
as benchmark in setting prices for loans, mortgages and derivative contracts.
Adding to
concerns are documents released by the New York Federal Reserve Bank this month
that show bank regulators in the United States and England had some knowledge
that bankers were submitting misleading Libor bids during the 2008 financial
crisis to make their financial institutions appear stronger than they really
were.
Among other
details, the Fed documents included the transcript of an April 2008 phone call
between a Barclays trader in New York and Fed official Fabiola Ravazzolo, in
which the unidentified trader said: "So, we know that we're not posting
um, an honest LIBOR."
The source
familiar with the regulatory investigation in Europe said two traders who have
been suspended from Deutsche Bank were among those being investigated. A
Deutsche Bank spokesman declined to comment.
The
Financial Times reported on Wednesday that regulators were looking at suspected
communication among four traders who had worked at Barclays, Credit Agricole,
HSBC and Deutsche Bank.
Credit
Agricole said it had not been accused of any wrongdoing related to the
attempted manipulation of Libor by Barclays, but had responded to requests for
information for various authorities related to the matter.
Beyond
regulatory penalties and criminal charges, banks face a growing number of civil
lawsuits from cities, companies and financial institutions claiming they were
harmed by rate manipulation. Morgan Stanley recently estimated that the 11
global banks linked to the Libor scandal may face $14 billion in regulatory and
legal settlement costs through 2014.
In the
United States, the regulatory investigation is being led by the Commodity
Futures Trading Commission, which has made the Libor probe one of its top
priorities.
(Reporting
by Matthew Goldstein and Jennifer Ablan in New York and Philipp Halstrick in
Frankfurt, with additional reporting by Emily Flitter in New York and ArunaViswanatha in Washington, D.C.; Editing by Alwyn Scott and Maureen Bavdek)
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| Under fire: Barclays former chairman Marcus Agius (right) with former CEO Bob Diamond (centre), and former chief executive John Varley (left) |
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