On Sunday, the major media networks began reporting that regulators in Europe and prosecutors could be close to serving several arrest warrants on thus-far unnamed traders. The charges include colluding to manipulate global benchmark interest rates.
It’s also been announced in recent days that federal prosecutors here in the states are in contact with their European counterparts and it’s possible arrest warrants in the U.S. will be kicked into motion. While the various defense attorneys aren’t releasing specifics from their respective clients’ camps, they do acknowledge being notified of several arrests due to criminal charges both here and abroad within the coming weeks. It’s not uncommon for the legal minds to compare notes beforehand in situations such as these.
Now, the media is awaiting details that might reveal further insight into how the traders operated. It’s been alleged their goal was to influence LIBOR – London Interbank Offered Rate as well as other major banks. Specifically, the focus was on those global rates that affect trillions of dollars on a daily basis – interest rates, etc. For anyone to be charged criminally would coincide with investigations by monetary regulators who are looking to at least major global banks.
These criminal charges, even though they’re simultaneously happening with the other investigations, would also place distance between the ones arrested and the banks involved. One unnamed source said the banks “are hoping that at least regulators will see the scandal was mainly due to individual behaviors of a group of graders”.
Part of the investigation includes reviewing emails dating back several months and possibly years. It’s believed the conspiracy is found in the details of those emails, which includes efforts to manipulate those rates that are set on a daily basis by a handful of banks.
The one thing that’s not entirely certain, at least to the media, is which banks American prosecutors are looking at. Those prosecutors aren’t talking, either – at least not about these specifics. There are concerns, though. The New York Federal Reserve Bank have documents that show American regulators as well as some in England had “some knowledge” of what the bankers were doing.
The misleading information being fed in 2008 could show a significant impact to the crisis here in the states that led to the mortgage meltdown and recession. Another document released by the federal bank included a transcript between a 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.
Barclays agreed in June to pay $453 million in fines and penalties to settle charges with regulators regarding its employees’ efforts to manipulate interest rates from 2005 forward. The bank then signed a non-prosecution agreement with American authorities once the settlement was reached. It’s believed CitiGroup, UBS and JPMorgan Chase could be involved. Lawyers here in the states are poised to act as a federal grand jury in DC continues its own separate probe.
Aside from the various penalties and criminal charges associated with this latest banking scandal, there remains the growing number of civil lawsuits from consumers, cities and other companies. Each claim damage due to the 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 meantime, none of the other banks are commenting.