A Treasury Select Committee report on the London interbank lending rate fixing scandal from August 2012 had demanded a response from the regulator on why it appeared to be at least two years behind US regulators, who had begun making enquiries over bank conduct in 2008 and 2009.
The Financial Services Authority response, published today (21 February), refuted that it was behind in this way, saying it played a crucial role in assisting enquiries from the Commodity Futures Trading Commission from 2008.
It added that it had launched a full investigation as soon as it had established “evidence of potential wrongdoing” and appointed investigators under the relevant provisions of FSMA.
The FSA said that although it accepted that the CFTC was first to initiate enquiries it provided assistance to the CFTC from the outset of its investigation, in particular “by obtaining documents and information from Barclays”.
The watchdog also said that it received information from Barclays during this early stage of the investigation and continued to monitor the situation.
The next phase of the investigation was conducted by the FSA in tandem with the CFTC and other US authorities as they became involved, the FSA said, claiming that the first regulatory interviews were conducted on a joint basis in late 2010.
Owing to the “significant number of documents and individuals relevant to the investigation and the way in which the issues developed over time”, it said this phase of investigation lasted until Spring 2012. The FSA then entered settlement negotiations with Barclays.
Andrew Tyrie, chairman of the TSC, highlighted that as “serious regulatory shortcomings” came to light, following the committee’s review “it is only right” that the FSA shoulders its share of the blame for this scandal.
He said: “Following the Treasury Committee’s inquiry, significant steps have been taken to reform Libor as well as to reform the culture and practices within our banks and regulators.
“We must have more confidence that such behaviour will not happen again. Much work remains to be done. The welcome adoption of judgement-led regulation can help. We will attempt to monitor the extent to which the new regulators, respectively the FPC and the PRA, put these words into action.
“What is clearly needed is a replacement of box-ticking intervention with the application of grey matter. The Treasury Committee will consider the FSA’s review into its own awareness of inappropriate Libor submissions when it is finalised.