Serious Fraud Office launches investigation into Libor fixing

The Serious Fraud Office (SFO) has announced that it will launch a formal criminal investigation into the fixing of the Libor and other interbank rates.

This follows an investigation by the UK financial regulator, the Financial Services Authority (FSA) and US Commodity Futures Trading Commission (CFTC) which saw Barclays fined a total of £290 million and led to the resignation of Barclays chief executive Bob Diamond this week.

The investigations concluded that some Barclays derivatives traders rigged the Libor rate, sometimes in collusion with traders from other banks to improve their positions. This element of Libor rigging happened between 2005 and 2006.

A further part of the Libor scandal concerns the period 2007 – 2008, around the time of the credit crunch, when Barclays was found to have manipulated their submissions to Libor to hide their own position and to reduce concerns that Barclays may have required a government bailout at that time.

This has led to further controversy this week that the deputy governor of the Bank of England, Paul Tucker, may have advised Barclays to continue to submit inflated figures. A file note of a phone call between Mr Diamond and Mr Tucker was released by Barclays.

Mr Diamond appeared before a Treasury Select Committee this week and said that he did not know of the scale of the scandal until last month. Mr Tucker will appear before the TSC on Monday to give his version of events.

However, Barclays confirmed that it did not view the call as an instruction to submit incorrect readings and Mr Diamond confirmed in his testimony at the TSC that he did not view the call as an instruction. However, co-founder of Barclays Capital, Jerry del Missier, interpreted a subsequent conversation with Mr Diamond as permission to submit incorrect readings.

Barclays said: “Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the [traders]."

Both Mr Del Missier and Barclays Chairman Marcus Agius have resigned this week, though Mr Agius is continuing in his role in a temporary capacity for the time being.

The SFO is the government department responsible for investigating financial fraud cases over £1 million. So far, it has not said which banks or individuals it is investigating.

A statement from the SFO said: “The SFO Director David Green QC has today decided formally to accept the LIBOR matter for investigation.”

Regulators are continuing to investigate other banks that may have been involved in the same practices.

Mr Diamond appeared before a Treasury Select Committee this week and said that he did not know of the scale of the scandal until last month.