On August 8, Barclays Bank PLC and Barclays Capital Inc. (collectively “Barclays”) reached a $100 million settlement to resolve a 44-state multistate investigation that exposed Barclays’ fraudulent and anticompetitive schemes to manipulate the London Interbank Offered Rate (“LIBOR”) from 2005 to 2009. The investigation, led by Attorney General Eric T. Schneiderman of New York and Attorney General George Jepsen of Connecticut, revealed that Barclays’ managers instructed LIBOR rate submitters to artificially lower their LIBOR submissions in order to avoid the appearance that Barclays was in financial difficulty. Also, Barclays’ traders asked LIBOR rate submitters to adjust the submissions to benefit the traders’ positions.
LIBOR is a benchmark that is designed to reflect the cost of borrowing funds in the market, and it is applied to many types of financial instruments, including futures, swaps, options, and bonds. It is also referenced by consumer lending products such as mortgages, credit cards, and student loans. LIBOR manipulation had a widespread impact on global markets and consumers, including government entities and not-for-profit organizations.
New Jersey Attorney General Chris Porrino highlighted the importance of this settlement: “As we all recognize, when public confidence in banks and the practice of investing erodes, the entire economy can suffer. This is an important settlement, not only for the recovery it provides for government entities and nonprofit organizations that were harmed, but also for the message it sends — that manipulation of financial markets is not acceptable and will not be tolerated.”
While Barclays is the first big bank to reach a settlement for LIBOR manipulation, it will likely not be the last. Connecticut Attorney General George Jepsen stated that the multistate investigation “developed significant evidence that some banks, like Barclays, that were responsible for setting LIBOR rates intentionally manipulated LIBOR in order to protect their public image and to help the business side of their operations be more profitable.”