British bankers face police inquiry
BRITAIN’S BANKERS face an investigation by the Serious Fraud Office into the manipulation of the key Libor inter-bank lending rate, which could lead to scores of prosecutions against staff in Barclays and a host of other financial institutions.
The decision by the Serious Fraud Office formally to open an investigation came after it had spent the last week poring over the outcome of regulatory probes by US and British authorities, which have led to a £290 million against Barclays alone. Investigations into other banks continue.
The fraud office last year refused to get involved, with its former head, Richard Alderman saying that he did not have the staff, or resources to mount an inquiry because the office’s budget had been cut by nearly 40 per cent over five years.
However, in a terse statement yesterday afternoon, Mr Alderman’s successor, David Green, said the office had “decided formally to accept the Libor matter for investigation”, though it cautioned later that it had “done nothing more than that” for now.
The office has far wider criminal powers than the Financial Services Authority to prosecute for false accounting, fraud or theft, but its own morale is at a low ebb after it was severely criticised for its handling of an investigation into financier Vincent Tchenguiz.
Mr Tchenguiz was arrested in March 2011 during a dawn raid on his home, while his brother Roberts homes and offices were also inspected.
A judge later accused the office of “sheer incompetence”. Its recent reputational wounds means the decision to take the case reflects both the political imperative that now exists in the UK for the authorities to be seen “to be taking on the bankers”, as one MP put it and its own need for a court victory. The change of heart came after the treasury made clear it would guarantee all the costs of the investigation, which are likely to run into millions given that there are up to 16 banks involved, even though years of work is available from the regulatory authorities.
Barclays was downgraded by two ratings agencies this week and the decision of the Serious Fraud Office will create concern among investors about the bank and every one of its peers which offer quotations for the Libor rate.
Before a House of Commons inquiry this week, ousted chief executive of Barclays Bob Barclays acknowledged that Libor manipulation had started in 2005 and continued until 2008. He said he was not personally culpable for the scandal, which, he said, involved 14 traders, but he did take responsibility for it, though his resignation only came when it became evident that he could not survive.
A criminal investigation is now also under way by the US department of justice into the collusion that took place. Meanwhile, all of the banks could face compensation claims worth billions from parties who believed they suffered losses as a result.
In 2005, traders ensured the figure was artificially high or low, depending on which was needed to maximise profits in other trades.
In 2008, Barclays deliberately under-represented the costs of borrowing from banks because it was afraid that such a quotation would be seen by the markets as evidence that it was in trouble.