UK banks face US Libor rate inquiry

UK banks face US Libor rate inquiry

Three British banks have been subpoenaed in America over the possible manipulation of an important global interest rate.

The attorneys general of New York and Connecticut issued the subpoenas to Barclays, HSBC and Royal Bank of Scotland, as well as four other banks - Citigroup, Deutsche Bank, JPMorgan Chase, and UBS - a source said.

Barclays has already been fined nearly £290m (€369.4m) by regulators in Britain and their transatlantic counterparts.

The bank, which last night declined to comment, has admitted that it submitted false information to keep the rate, known as Libor, low.

It was unclear exactly what the detail of the subpoenas involved but they are requests for information backed with the force of the law.

Libor is short for London interbank offered rate and is the lending rate that affects mortgages and loans.

Libor is also used to determine the rates for the bonds issued by US city and county governments.

It is used to set the interest rates on trillions of dollars in contracts around the world, including mortgages and credit cards.

A self-policing system, Libor relies on information that global banks submit to a British banking authority.

Barclays has admitted that it submitted figures that were lower than accurate for its interbank borrowing, including during the financial crisis in the fall of 2008.

Those reports made it appear that Barclays was healthier than it was and the scandal left the bank's reputation in tatters and sent shockwaves through the entire industry.

UBS filed a report with regulators on July 31 saying that agencies, including state attorneys general were examining whether it and other banks had tried to manipulate the rate.

Citigroup and JPMorgan Chase also declined to comment.

Last week Sir David Walker - the City grandee who oversaw a review into bank governance for former British Prime Minister Gordon Brown - was unveiled as the new chairman of Barclays.

Walker will join as non-executive director from September 1 before succeeding chairman Marcus Agius who announced his intention to resign in the wake of the Libor-rigging scandal.

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