Barclays Bank will pay $100 million to settle charges from 43 states and the District of Columbia that it manipulated key interest rates, affecting payments on investments.
“There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the fair functioning of financial markets,” said New York Attorney General Eric Schneiderman.
The states charged that the British bank manipulated the London Interbank Offered Rate or LIBOR. LIBOR is an interest rate that has a widespread impact on global markets and consumers, including being used as a benchmark rate for mortgages.
The LIBOR is set daily by rate submissions received from a panel of 16 banks, including Barclays. The basis for any rate submission to LIBOR is usually meant to reflect each bank’s assessment of the rates at which it can borrow unsecured interbank funds.
An investigation into Barclays’ conduct on LIBOR rate submissions showed that Barclays manipulated LIBOR two ways.
First, during the financial crisis from about 2007 and 2009, Barclays tried to hide from consumers that it was facing financial problems and needed to pay a higher rate than other banks of its size to borrow money. Barclays’ managers told internal LIBOR submitters to lower Barclay’s settings.
Second, from 2005 to 2009, Barclays’ traders asked their own LIBOR submitters to change their settings to manipulate trading positions. Submitters often agreed to the requests. These requests also came from outside traders, and Barclays' traders agreed to pass them along to their own submitters, therefore conspiring with other banks.
Barclays is the first of several LIBOR-setting panel banks under investigation by the state attorneys general to resolve the claims against it.
The states taking part in settlement include: Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
In a separate settlement in 2012, Barclays agreed to pay $453 million after an investigation by U.S. federal and British authorities on alleged LIBOR manipulations.