EC plans mean Libor-fiddlers could face jail

Tim Wallace
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LIBOR manipulation will become a crime across the European Union under new plans unveiled yesterday by commissioners Viviane Reding and Michel Barnier.

The announcement comes after Barclays was fined £290m by the Financial Services Authority for entering false interest rates to the British Bankers’ Association (BBA) who set the key interbank lending rate.

That scandal led to chief executive Bob Diamond and chairman Marcus Agius resigning, while several other banks in the UK and US are under investigation.

Commissioner Reding argued that the introduction of criminal sanctions against the individuals responsible represents the strongest deterrent available, adding the requirement that member states must outlaw manipulation of such rates to the Markets Abuse Directive (MAD).

“Keeping Libor artificially high or unusually low is a scam. Homeowners, small businesses and students may have paid higher interest rates because of the activity of certain bankers,” said Reding. “Market abuse is not a victimless offence. It is a major problem for confidence in our financial system and we need to address it.”

She added that MAD will be revisited in four years’ time to check all members have implemented its proposals, and judge the most effective systems. It will be down to member states to decide the exact sanction faced by criminals.

Treasury sources said the UK is already planning to toughen up controls, with a consultation currently underway.