Did Big Banks Manipulate LIBOR Rates?


The Securities and Exchange Commission and the Justice Department are investigating whether Bank of America Corp., Citigroup Inc., UBS AG, and other banks submitted inaccurate data in an attempt to manipulate the London Interbank Offered Rate (LIBOR), according to a Wall Street Journal article by David Enrich and Jean Eaglesham called “U.S. LIBOR Probe Includes BofA, Citi, UBS.” The U.S. Commodity Futures Trading Commission, as well as British and Japanese regulators, are also investigating possible LIBOR manipulation, according to the article.

The U.S. investigation has been ongoing for a year or more. Apparently, regulators have requested documents and information from the 16 LIBOR panel banks, and recently expanded the investigation to include 20 banks. More recently, the SEC subpoenaed Bank of America, Citigroup and UBS, and summoned bank officers to provide testimony, according to the article.

LIBOR is a daily reference rate compiled from a sample of 20 giant banks submitting daily data about how much it costs them to obtain unsecured loans from other banks in the London overnight interbank money market. LIBOR is a closely-watched parameter used to price trillions of dollars worth of mortgages and other loans in the U.S. and other countries.

Government and industry officials believe that some banks tried to manipulate LIBOR by submitting inaccurate data to the BBA in the 2006-2008 period, according to the article.

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