UK to detail Libor reform steps
BRITAIN is expected to detail today the scope of the reform of Libor, the interest rate benchmark that was rigged by banks in a scandal that
damaged London’s finance centre status.
BRITAIN’s government is expected to detail today the scope of the reform of Libor, the interest rate benchmark that was rigged by Barclays and other banks in a widening scandal that has damaged London’s standing as a finance centre.
The UK Treasury is set to announce the remit for a review of the rate at which banks are willing to lend to one other. It is being carried out by Martin Wheatley, a top official at the UK’s Financial Services Authority (FSA) regulator.
Mr Wheatley will look at how Libor is set and whether it should be based in future on actual transactions. He will also look to reform how the rate-setting process is governed and how it should be supervised in future. The rate has
Regulators have been fending off accusations from policy makers that they failed to take action in 2008
been to date self-regulated by its sponsor, the British Bankers Association, a situation that has sparked now a transatlantic blame game.
Regulators have been fending off accusations from policy makers that they failed to take action when the rate did not appear to work during the 2008 market meltdown, one of the periods covered in a settlement with the authorities under which Barclays paid a record fine.
Mr Wheatley has said he would look at other market benchmarks which are not directly supervised, without mentioning names.
Barclays’s attempts to put its troubles behind it in the wake of last month’s record fine for manipulating Libor were complicated on Friday by its disclosure that four current and former senior employees, including finance director Chris Lucas, were being probed by the FSA. The bank made the disclosure Friday as it reported first-half profit.
Barclays, which owns retail bank Absa, is being investigated over whether it adequately disclosed fees it agreed to pay to the Qatar Investment Authority as it sought to raise money from investors including the sovereign wealth fund, according to a person with knowledge of the situation.
“The bank entered into an agreement for the provision of advisory services by Qatar Investment Authority to Barclays in the Middle East,” the lender said in a June 2008 statement detailing the fundraising. The FSA is probing whether that disclosure was adequate, said the person, who declined to be identified because the terms of the investigation are private.
Chairman Marcus Agius again apologised for the bank’s transgressions. “However, our leadership continues to focus on the delivery of our financial performance targets.”
Pretax profit excluding one-time items rose 13% to £4,23bn, helped by fewer bad loans at the consumer unit and market-share gains at the investment bank. Barclays said on Friday it set aside an extra £450m during the half to compensate customers who were mis-sold derivatives. The lender has opened an internal review into its business practices, led by Anthony Salz, an executive vice-chairman of Rothschild and a former lawyer.
Barclays stock jumped 8,7% to 167p on Friday in London trading, the steepest increase since January. The shares are still about 13% below their June 26 close, the day before the record Libor fines were disclosed. Criticism from MPs and the Bank of England forced the resignation of the bank’s top three executives, including former CEO Robert Diamond. Barclays also said on Friday it was the target of more lawsuits linked to claims it rigged the London interbank offered rate. The bank did not give an estimate of how much the suits may cost.
Barclays raised £7bn of capital from investors including the Abu Dhabi and Qatar sovereign wealth funds as the financial crisis worsened in 2008. The move allowed the bank to avoid a government bail-out, unlike Royal Bank of Scotland Group and Lloyds Banking Group.
Stephen Benzikie, an external spokesman for Qatar Holding, part of the Qatar Investment Authority, and Liam Parker, an FSA spokesman, declined to comment.
Mr Agius said on Friday Mr Lucas’s name was deliberately disclosed by the bank as the information was potentially market-moving, and said investigations such as this occurred routinely. The board had “full confidence” in Mr Lucas.
Roger Jenkins, former head of Barclays’s structured capital markets unit, received a bonus of more than £30m for helping to broker the investments, while Amanda Staveley, of PCP Capital Partners, was paid a £40m commission for her advice, the New York Times reported in November 2008. Reuters, Bloomberg