Banks could face criminal charges over Libor fixing

CRIMINAL charges can be brought against those responsible for manipulating interbank lending rates, the UK’s fraud squad confirmed yesterday, paving the way for prosecutions of individual bankers over the Libor-rigging scandal.

The Serious Fraud Office (SFO) said that as part of an ongoing investigation into the scandal, it had now concluded that “existing criminal offences are capable of covering conduct in relation to the alleged manipulation of Libor and related interest rates”.

Although the agency would only confirm that it is investigating a “number of financial institutions”, lawyers told City A.M. that individuals, rather than banks, are more likely to face any criminal charges.

“They will be concentrating their fire on individuals. The question is how far up the food chain it would it be possible to bring a claim against an individual,” said Owen Watkins of law firm Lewis Silkin.

“[The SFO] think there is a case to answer but we will have to wait and see whether they can formulate a sufficiently strong case to take to a jury. My guess is that they will wait until all the other institutions come forward and then see who they can take action against.”

Fraud charges carry a maximum sentence of 10 years in jail.

Barclays remains the only bank to admit that its employees have rigged the Libor rate, although others, including RBS, have confirmed that they are under investigation and face fines.

Earlier this week it was reported that US prosecutors are on the cusp of arresting individuals as part of their own criminal investigation and it is still possible British bankers could be extradited to face charges on the other side of the Atlantic.

Meanwhile the government yesterday announced that specific legislation regarding the manipulation of Libor could be on the statute book by the end of the year.

Martin Wheatley, managing director of the Financial Services Authority, has been commissioned to conduct a review of the Libor-setting process and has been told to publish an initial discussion paper by the 10 August, with final conclusions due in September.

This will enable any recommendations to be added to the Financial Services Bill that is currently working its way through parliament.