Delaware and other states have announced a $100 million settlement with Barclays Bank PLC and Barclays Capital Inc. for conduct involving the manipulation of the London Interbank Offered Rate (LIBOR). LIBOR is used in setting interest rates on loans and other instruments.
According to a release, the investigation, conducted by a multistate working group of 44 State Attorneys General, led by the Attorneys General of New York and Connecticut, pointed to Barclays manipulating LIBOR through two different kinds of conduct.
The long-running case has led to earlier settlements by the British bank that has credit card operations in Delaware.
First, in 2007-2008, during the financial crisis period, Barclays’ managers frequently told LIBOR submitters to lower their LIBOR settings in order to avoid the appearance that Barclays was in financial difficulty and needed to pay a higher rate than some of its peers to borrow money, the release stated.
The LIBOR submitters complied with the instructions and suppressed their LIBOR submissions during that period. Second, at various times from 2005 to 2007 and continuing at least into 2009, Barclays’ traders asked Barclays’ LIBOR submitters to change their LIBOR settings in order to benefit their trading positions, and the submitters often agreed to the requests.
At times, those requests came from traders outside the bank, and Barclays traders agreed to pass them along to Barclays’ submitters, thus colluding with other banks, the release indicated.
The attorneys general alleged that government entities and not-for-profit organizations throughout the U.S., among others, were defrauded of millions of dollars when they entered into swaps and other investment instruments with Barclays without knowing that Barclays and other banks were making such moves.
Governmental and not-for-profit entities with LIBOR-linked swaps and other investment contracts with Barclays will be notified if they are eligible to receive restitution from a settlement fund of $93.35 million. The balance of the settlement fund will be used to pay costs and expenses of the investigation and for other uses consistent with state law.
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 Barclays has cooperated fully from the outset.
The states joining the Barclays settlement include: Alabama, Alaska, Arizona, Arkansas, 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, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming
Not a part of the suit was South Dakota, a long-time rival to Delaware in working to attract financial services jobs. There have been scattered concerns in Delaware about joining such legal actions, given the sizable presence of the financial services industry.
The investigation into the conduct of several other USD LIBOR-setting panel banks is ongoing.
