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Home > Regulation > UK Regulation

At least five banks manipulated Libor, Boulger

Mortgage expert says it is a “fair assumption” that at least five banks submitted lower rates.

By Donia O'Loughlin | Published Jul 04, 2012 | comments

At least five banks must have manipulating the London interbank offered rate to make a difference to the way it is calculated by the British Bankers Association, Ray Boulger, senior technical manager at broker John Charcol, has told FTAdviser.

According to Mr Boulger, the BBA calculates the Libor rate by excluding both the top 25 per cent of bank submissions and the bottom 25 per cent.

He said: “The number of banks submitting rates was around 16, so one would have had the top four banks and bottom four banks’ submissions taken out of the calculations so the middle eight would have been used and those rates averaged.

“To actually have been a part of the [Libor] calculation, there would have to be at least five banks submitting incorrect rates, assuming they all submitted them incorrectly the wrong way [by lowering them].

“I think this is a fair assumption because they were all submitting lower rates.”

Even if there were not at least five banks submitting incorrect rates, the fact that a lender can be taken out of the equation - by either being in the top or bottom quartile - “means that they still could have influenced the rate”.

Mr Boulger said: “The result of all that, is where the rate was falsified it would have been lower than it should have been and so to the extent that it had an impact on mortgagees would mean that mortgage borrowers would be paying less than they should have been.

Chancellor George Osborne has named in Parliament six banks who are said to be under investigation by the Financial Services Authority, including Barclays, HSBC, the Royal Bank of Scotland, Lloyds, UBS and Citigroup.

However, there have been reports that he was wrong about HSBC and the lender confirmed to FTAdviser that it is not under FSA investigation.

Bob Diamond, the former chief executive of Barclays who resigned yesterday (3 July), is appearing in front of the Treasury select committee today.

The committee will question Mr Diamond about the £290m penalties levied against Barclays by authorities in the UK and the US, following an investigation into the submission of various interbank offered rates.

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