Antitrust Law Daily Wrap Up, TOP STORY: Barclays reaches $100M multi-state settlement over LIBOR manipulation, (Aug 8, 2016)

By Linda O’Brien, J.D., LL.M.

British banking and financial services company Barclays has agreed to pay $100 million to settle an investigation by the State of New York and 43 other states for fraudulent and anticompetitive conduct concerning the manipulation of U.S. Dollar (USD) London Interbank Offered Rates (LIBOR) and other benchmark interest rates, New York Attorney General Eric T. Schneiderman announced today.

According to the settlement agreement, LIBOR is the basis for the settlement of interest rate futures and options contracts on many of the world’s major futures and options exchanges. LIBOR is critical to financial markets and has widespread impact on global markets and consumers.

During the relevant time period, a panel of 16 banks made USD LIBOR submissions that were supposed to reflect borrowing rates in the interbank market. A daily LIBOR rate was calculated by averaging the middle eight submissions. The investigation found that, at times during the economic crisis from roughly from 2007 to 2009, Barclays managers told LIBOR submitters to lower their LIBOR settings to avoid the appearance that Barclays was in financial difficulty and needed to pay more than some of its competitors to borrow money. The LIBOR submitters complied with the instructions and suppressed their LIBOR submissions.

In addition, from 2005 to 2007 and continuing at least into 2009, Barclays’ traders at times asked Barclays’ LIBOR submitters to change their LIBOR settings in order to benefit the traders’ positions, and the submitters often followed through on the requests, instead of setting LIBOR based on Barclays’ borrowing costs. Barclays also believed that other banks’ LIBOR submissions likewise did not reflect their true borrowing rates and that published LIBOR did not reflect the cost of borrowing funds in the market, as it was supposed to do.

According to the New York Attorney General, government entities and not-for-profit organizations in New York and throughout the United States, among others, were defrauded of millions of dollars when they entered into swaps and other financial contracts with Barclays without knowing that Barclays and other banks on the USD-LIBOR-setting panel were manipulating LIBOR and, at times, colluding with other banks.

"There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the fair functioning of financial markets," said Attorney General Schneiderman. "As a result of Barclays’ misconduct, government entities and not-for-profits were defrauded of funds that otherwise could have been used to benefit the people of New York."

Barclays is the first of several USD-LIBOR-setting panel banks under investigation by the State Attorneys General to resolve the claims against it and it has cooperated with the investigation from the outset. Other states joining New York in the Barclays settlement include: Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin & Wyoming. The investigation into the conduct of several other USD LIBOR-setting panel banks is ongoing.

Companies: Barclays Bank PLC; Barclays Capital Inc.

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