US investigates Libor scandal

New York attorney general Eric Schneiderman has begun an investigation into possible manipulation of the Libor benchmark international lending rates by global banks, his spokesman said.

Mr Schneiderman, along with Connecticut's attorney general George Jepsen started the investigation six months ago into the possible rigging of Libor, the London interbank offered rate, New York attorney general spokesman James Freedland told Reuters.

Libor is compiled from estimates by big banks of how much they believe they have to pay to borrow from each other. It is used for interest rate derivatives contracts and influences rates on many lending transactions, including mortgages, student loans and credit cards.

"Working together, the New York and Connecticut attorneys general have been looking into these issues for over six months, and will continue to follow the facts wherever they lead," Mr Freedland said.

Mr Jepsen's spokeswoman did not immediately respond to a call and an email for comment.

Barclays, the bank at the centre of the Libor scandal, was fined a record $450 million last month by US and British authorities for manipulating the rate, but the deal does not shield Barclays employees from criminal prosecution.

The US Justice Department is also building criminal cases against several financial institutions and their employees related to the manipulation of interest rates, the New York Times reported on Saturday.

The Times said cities, states and municipalities in the United States were trying to determine whether they suffered loses due to rate manipulation and some had filed suit.

Given the broad scope of the Libor case and the number of institutions thought to be involved, the investigations could provide authorities with a "signature moment" to hold big banks accountable for misdeeds during the financial crisis, which hit global markets from late 2007, the newspaper said.

The investigation is unusually complex, could continue for years and end in settlements rather than indictments, the Times said, citing officials close to the case.

Separately, Bloomberg reported that Barclays traders involved in allegedly manipulating Libor rates between 2005 and 2007 could face possible US charges before the Labor Day holiday in September. The agency had cited a person familiar with the Justice Department investigation.

A spokeswoman for the Justice Department declined to comment to Bloomberg. Both Justice department and Barclays could not immediately be reached for comment by Reuters outside regular US and UK business hours.

Reuters