The U.K. government will begin a review into the future of the London interbank offered rate after Barclays Plc was fined $451 million three days ago for submitting false rates to benefit derivatives trades.
The inquiry, which begins next week, will focus on possible criminal sanctions against people who breach future regulations on the rate, a Treasury spokesman, who declined to be named because of government policy, said today. Separately, Barclays Chief Executive Officer Bob Diamond and Chairman Marcus Agius have been called to appear before lawmakers on the Treasury Select Committee.
Barclays, the U.K.’s second-largest lender, was fined the record sum and its top executives agreed to forgo bonuses after investigators found traders and senior managers “systematically” tried to rig the Libor and Euribor, its equivalent in euros.
Opposition Labour Party leader Ed Miliband today called for a “full, open and independent inquiry which the public can trust” into the customs and practices of the banking industry.
Diamond has been asked to appear before the Treasury Select Committee on July 4 to face questions “about the penalties levied against Barclays by authorities in the U.K. and the U.S. following an investigation into the submission of various interbank offered rates,” the committee said in a statement today.
Barclays non-executives, including Agius, have been asked to appear on July 5, it said.
“The Libor interest rate benchmark -- crucial to transactions right across the economy and affecting millions of people -- was systematically rigged over a period of years,” select committee Chairman Andrew Tyrie said in the statement. “It appears that many banks were involved and Barclays were the first to own up.”
Tyrie said the practice was a “damaging scam” that had “severely tarnished” the reputation of Britain’s financial services industry.
“The public’s trust in banks has been even further eroded,” he said. “Restoring the reputational damage must begin immediately. Parliament and the public need to know what went wrong and whether the perpetrators have been rooted out. We also need to be given confidence that this has been put right.”
The British public “wants a moment of reckoning” for banks, Miliband said in a televised speech today.
“They want a light shone into every dark corner of our banking system,” Miliband told a conference in London. “They want bankers held to account. They want the system rebuilt. Nothing less than a full public inquiry can do that. Sticking-plaster solutions will not heal this wound.’