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Canadian and Swiss investigators target LIBOR trades | Banking Insight

The Canadian Competition Bureau targeted HSBC, RBS and Barclays Bank in its investigation on suppressing of the LIBOR rate seemingly as all London based banks conceded they were subject to investigations. The banks seeming colluded to thus enhance the prices of global interest rate derivatives during the crisis period from 2007 till 2010.

Various regulators in US and Japan were also conducting investigations into these banks , the collusion was aimed at reducing interest costs and thus effectively contol investor panic outbursts in the $350 tln LIBOR related products

The Swiss Competition Commission COMCO said “Derivative traders working for a number of financial institutions might have manipulated these submissions by co-ordinating their behaviour, thereby influencing these reference rates in their favour” 

COMCO was focussed on the problem that appeared in the Swiss market.

The other banks involved in the inquiry include Credit Suisse, Deutsche Bank, JP Morgan, Mizuho Financial Group, Rabobank, Societe Generale, Sumitomo Mitsui Banking Corporation and UBS.

The British Bank Association outsourced the setting of LIBOR to Thomson Reuters several years ago, the news clearing house apparently using its offices to manage the news flow and in this case set an opportune rate to keep the markets going

The banks would obviously appear more healthy and liquid despite the sub prime hit and CDS illiquidity with LIBOR moving to a predefined range based on where they could present the banking market per se to be, together coordinating on one interest rate than the entire news box. Banks argue that with the Wholesale lending market hit for a six, the inteer bank market was non existent(“breakdown in interbank lending”)  and setting borrowing rates was difficult

Margaret Cole retired today from the yet not defunct Financial Services Authority in the UK. The FSA regulatory and fraud investigation powers will be handed over to a division of the Bank of England.

Japan admitted last month there was no evidence but that the fined banks Citi and UBS lacked internal controls to discourage employees from manipulating the rate. Deutsche Bank, JP Morgan and Cit and UBS have currently suspended traders or asked them to go on administrative leave.


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