US initiates criminal Libor probe

Justice Department has initiated a criminal probe of banks that have been manipulating the Libor, a benchmark for trillions of loans worldwide.

The keyword here is criminal, because doing such a probe already presumes that a crime has been committed and the only thing needed are the facts.

“Several major global banks,” reports Reuters, “including Citigroup Inc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc and UBS AG, have disclosed that they have been approached by authorities investigating how Libor is set.”

Canadian court has already looked at the same issue and is said to have a willing party that has disclosed how certain banks have manipulated Libor.

The unnamed bank, seeking immunity, told the Canadian court that JPMorgan Chase, Deutsche Bank and HSBC are among the 7 banks that were manipulating Libor.

Documents looked at by Bloomberg say that Canada is investigating Citigroup, Royal Bank of Scotland Group, ICAP and RP Martin.

In December of 2011, Japan has penalized UBS and Citigroup because their employees “repeatedly asked bankers to change the rates they submit for setting Tibor to gain an advantage“.

People say that during the escalation of the Eurozone crisis, a noticeable discrepancy arouse between interbank dollar costs and the quoted Libor rate: the actual cost of borrowing dollars was way higher then what the banks reported to the Libor setting body in London.

“Various European banks are currently bidding to pay higher rates for short-term money than what they post to the British Bankers’ Association’s daily survey of participants in the interbank market, people who trade in that market say. That means their real cost of borrowing is considerably higher than the London interbank offered rate,” wrote the Wall Street Journal in November 2011.