Banks consider settlement with authorities in Libor scandal

Bob Diamond

Several banks under investigation in the recent Libor scandal are seeking to settle with regulatory authorities rather than face public backlash like that following Barclays’s recent settlement.

Barclays agreed last month to pay $453 million in a settlement with British and U.S. authorities following allegations that the bank attempted to manipulate the London interbank offered rate, commonly known as Libor. The scandal incited public ire, leading to the resignations of Barclays CEO Robert Diamond, chairman Marcus Agius and COO Jerry del Missier.

Individuals with knowledge of the banks’ positions on settlement talks, which were reportedly proposed before Barclays’s settlement, said that none of the banks being investigated want to be next in line for fear of hostility by the public and legislators, Reuters reports.

Banks currently under investigation include Deutsche Bank, JPMorgan Chase, Citigroup and HSBC, though it is unclear which banks could be involved in the settlement talks or if regulators would enter the discussions.

Severe penalties may be imposed on banks found guilty in the scandal. Authorities from around the world, including Canada and Japan, are coordinating with U.K. and U.S. authorities in the ongoing, multiyear investigation.

Experts estimate that the scandal could potentially cost the financial industry between $20 billion to $40 billion, a blow to an industry already struggling under the increasing regulatory burden, Reuters reports.

Regulators and central bankers plan to hold hearings in September to determine whether Libor can be reformed or whether the system is so broken that use of the
benchmark interest rate should be discontinued, Global Post reports.

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