Big banks investigated over LIBOR rate manipulation

Section:

By Brooke Masters, Patrick Jenkins, and Justin Baer
Financial Times, London
Tuesday, March 15, 2011

http://www.ft.com/cms/s/0/ab563882-4f08-11e0-9c25-00144feab49a.html

Regulators in the United States, Japan, and UK are investigating whether some of the biggest banks conspired to "manipulate" the benchmark interest rate used to calculate the cost of billions of dollars of debt.

The investigation centres on the panel of 16 banks that help the British Bankers' Association set the London interbank offered rate, or Libor -- the estimated cost of borrowing for banks between each other.

In particular, the investigation was looking at how Libor was set for US dollars during 2006 to 2008, immediately before and during the financial crisis, people familiar with the probes said.

The probe came to light on Tuesday when the Swiss bank UBS disclosed in its annual report that it had received subpoenas from three US agencies and an information demand from the Japanese Financial Supervisory Agency.

... Dispatch continues below ...



ADVERTISEMENT

The Gold Standard Now: It Can Work

On March 17 former Reagan Gold Commission member Lewis E. Lehrman, journalist James Grant, and Prof. James Salerno will testify before U.S. Rep. Ron Paul's Subcommittee on Domestic Monetary Policy. This is the most significant monetary policy hearing in at least a generation, probably in 40 years, possibly in our lifetimes.

Today a dollar is worth 80 percent less than it was 40 years ago, and less than 5 percent of its value a hundred years ago. We deserve a dollar that is as good as gold, a dollar that will hold its value from year to year so we can be financially secure and our economy can generate more and better jobs.

For most of America's history, our dollar was literally as good as gold. But on August 15, 1971, our politicians destroyed the link between gold and the dollar. They destroyed the foundations of our economic system.

A new Internet site, TheGoldStandardNow.org, provides news and cutting-edge analysis about this most important issue and explains how the gold standard worked in the past and how it can work in the future. Visit us today:

http://www.thegoldstandardnow.org/about/137-welcome-newsmax



The bank said the regulators were focusing on "whether there were improper attempts by UBS, either acting on its own or together with others, to manipulate Libor rates at certain times."

All the panel members are believed to have received at least an informal request for information -- an earlier stage in an investigative process before a subpoena.

Witnesses had been interviewed by investigators from the US Securities and Exchange Commission, the Department of Justice, and the UK's Financial Services Authority, people familiar with the probe said.

The inquiry has been under way for some months. At least one bank received its initial request for information in October, people familiar with the matter said.

The BBA produces Libor rates for 10 currencies using eight to 20 contributor banks. The contributors submit the rates at which they think they could borrow on the open market. Outlying submissions are tossed out and the reported rate is the mean of the middle values.

Critics of the process for setting Libor -- which is used as a reference rate for about $350,000bn in financial products -- have long claimed it is antiquated and lacking in transparency. Commentators complained bitterly during the financial crisis that the rates were distorted because they believed weaker banks were unwilling to admit higher borrowing costs.

UBS declined to comment beyond its disclosure. The regulators declined to comment. The other banks on the panel at the time covered by the probe either declined to comment or spokesmen could not be reached.

They are: Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds, Rabobank, Royal Bank of Canada, Bank of Tokyo-Mitsubishi, Norinchukin Bank, Royal Bank of Scotland, and West LB.

HBOS, which has since merged with Lloyds, was also a member.

The BBA said: "We are committed to retaining the reputation and integrity of BBA Libor, which continues to be the authoritative benchmark of the wholesale money market. It has a straightforward and unambiguous calculation method, which excludes any rates which are significant outliers. It is fully transparent -- all of the data inputted by the contributor banks is publicly available, as is our methodology."

* * *

Support GATA by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16



ADVERTISEMENT

Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon

Company Press Release, January 18, 2011

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.

PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.

Following the transaction:

-- Prophecy will own approximately 90 percent of PCNC.

-- PCNC will consolidate its share capital on a 10 old for one new basis.

-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.

-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.

Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.

For the complete announcement, please visit:

http://prophecyresource.com/news_2011_jan18.php


<