On Thursday 27 December it was reported by Reuters that Barclays “accidentally lost” 10 years of instant chat message data, over the period LIBOR was known to be rigged, killing off any serious hopes of a prosecution for USD LIBOR manipulation.
Financial campaigners have questioned whether investigations into LIBOR would confirm the presence of cartel like activity in currencies other than Japanese Yen, to which previous fines levelled against RBS, UBS, Barclays and ICAP relate.
LIBOR is set in 16 currencies. The top 5 traded currencies by volume being USD, Euro, JPY, Stirling, and AUD.
With 16 globally traded LIBOR currencies, even 18 months after the first Barclays fine of June 2012, according to regulators only evidence of Yen manipulation has been uncovered. All of the UK and EU based charges against largely UK and EU banks have been curiously restricted to Japanese Yen LIBOR.
Despite beings the worlds’ number 1 traded currency, we are yet to see prosecution for US LIBOR manipulation, nor US trading banks.
Back in September, when ICAP, who remain under investigation for ISDAfix manipulation were fined for rigging LIBOR – I asked Rolling Stone financial editor Matt Taibbi for his views on broader LIBOR currency manipulation.
On 27th May 2008, Timothy Geithner’s US Treasury office identified concerns to the Bank of England regarding deliberate misreporting of LIBOR, recommending greater transparency with respect to “the financial relationships between the BBA and panel banks, and around the BBA’s financial interests in LIBOR”.
They then questioned the composition of the US dollar LIBOR rate setting panel, before making further suggestions about how USD LIBOR could be calculated to be more appropriate to participants in SWAPS and other financial markets.
Further email exchanges between Paul Tucker at the Bank of England and Barclays note visible discrepancies between USD and Sterling LIBOR movements.
Financial commentator Mark Gongloff revealed that US Treasury Secretary, Timothy Geithner knew LIBOR was rigged when the US FED bailed out AIG in 2009. Tim Geithner noted:
Government had no choice during the financial crisis but to lend to banks and AIG using an interest rate, Libor, that everybody knew was flawed.
Crucially, comments from Geithner suggest that the US Treasury was also concerned about misreporting and manipulation in US dollar LIBOR.
The fact we are yet to see prosecution(s) of banks by US or UK regulators for manipulation of US dollar LIBOR poses serious questions as to whether Barclays loss of instant message chat data is a one off event, or part of a larger trend of US regulatory failure across US LIBOR setting panel banks that potentially spills over into other currencies including the Stirling and Euro.
Could be time to check back in with Matt Taibbi for an update…