THE CITY watchdog missed dozens of chances to uncover the Libor fixing scandal, the regulator admitted yesterday, delaying investigations into the offending banks.
But as the Financial Services Authority (FSA) did not have formal responsibility for the key interbank interest rate an investigation has not deemed the slow response to the wrongdoing to represent a major failing.
The internal audit investigated what the FSA knew in the period from January 2007 to May 2009.
It reviewed 97,000 documents and found 26 references to possible lowballing – that is, banks giving falsely low Libor submissions in order to give the impression their borrowing rates were low, and so that they were not perceived as a risky bank.
However, it found no evidence the FSA could have known about traders manipulating Libor for their own gain – that was only discovered when regulators later investigated lowballing.
“More intense supervision may not be the most appropriate lever,” said FSA boss Lord Turner.
“Better whistleblowing procedures, greater accountability of top management, and more intense requirements for self-reporting of suspicious activity may turn out to be more effective tools.”
The British Bankers’ Association had run Libor, but a tendering process will soon be under way to hand control of the market interest rate to another group as soon as this summer.
MPs vowed to scrutinise the regulators closely in future.
“The FSA has admitted it had 26 warnings that this appalling practice was taking place. It also had other information that, taken cumulatively, ought to have set alarm bells ringing,” said Andrew Tyrie, chairman of the influential Treasury Select Committee.
“It is concerning that no action was taken; that it wasn’t tells us something may have been amiss at the FSA. The FSA’s successor bodies will need to do better. The Treasury Committee’s scrutiny of them will be intensive.”