The Chancellor of the Exchequer made a statement to Parliament today on the FSA’s investigation into Barclays’ attempted manipulation of the LIBOR and EURIBOR rates.
On the general culture that the FSA’s report reveals, the Chancellor said:
“…it is already clear that the FSA’s investigation demonstrates systematic failures at the heart of the financial system at the time…
…the FSA report is a shocking indictment of the culture at banks like Barclays in the run up to the financial crisis.
The email exchanges between derivative traders and the Libor submitters working read like an epitaph to an age of irresponsibility.
It is clear that Barclays – and potentially other Banks – were still in flagrant breach of their duty to observe proper standards of market conduct and give citizens and businesses in this country and elsewhere proper transparent information about the true price of money.”
- confirmed that the FSA does not currently have the power to impose criminal sanctions for LIBOR manipulation;
- stated that it is looking at extending the market abuse regime in the FSMA 2000 so that such activity would be caught within that civil regime in future; and
- confirmed that the Government will consult on criminal sanctions for bank directors:
“I cannot comment today on possible criminal investigations for individuals involved in this activity.
The authorities are exploring every avenue open to them but the scope of the FSA’s criminal powers granted be the previous Government does not extend to being able to impose criminal sanctions for manipulation of LIBOR.
As part of our review into LIBOR and the strength of the financial regulatory architecture, we are examining whether strengthening the criminal sanctions regime for market abuse and market manipulation is warranted, and if so, we will provide for these powers quickly.
Also, next week, the Government will be publishing a consultation in response to the report on the failure of RBS and will consider the possibility of criminal sanctions for directors of failed banks where there is proven criminal negligence. “
On the possibility of criminal prosecutions in relation to LIBOR manipulation outside the financial services legislative regime:
“There are a number of individuals under formal investigation by the FSA, and this number is expected to increase as the investigations continue.
The Serious Fraud Office is aware of the matters under investigation and there are ongoing discussions between the FSA and the SFO about the evidence as it develops.”
And on Bob Diamond, the Barclays Chief Executive:
“As far as the Chief Executive of Barclays is concerned, he has some very serious questions to answer today.
What did he know and when did he know it?
Who in the Barclays management was involved and who therefore should pay the price?
It is quite right that the Treasury Select Committee has asked him to appear urgently to account for himself and for his bank.
We all want to hear his answers.
The story of irresponsibility is not over yet.”