Updated with clarification
Barclays PLC's record $451 million in fines for interest rate manipulation could be the turning point in a global investigation into critical interest rate benchmarks used by institutional investors.
One money manager who asked not to be named said if global investigations confirm that banks had colluded to manipulate the London interbank offered rate and the euro interbank offered rate, “it's the financial equivalent of poisoning the water supply.”
Barclays' admission that employees attempted to manipulate LIBOR and EURIBOR directly led to the July 3 resignations of Robert Diamond, the bank's CEO, and Jerry del Missier, chief operating officer. Barclays' Chairman Marcus Agius had resigned July 2.
David Paterson, head of corporate governance at the National Association of Pension Funds in London, said in an e-mailed statement: “The impact of LIBOR manipulation on pension funds is hard to pin down, and could have happened through a range of financial instruments. Pension fund trustees should ask their fund managers to tell them if and how their assets have been affected.
“This issue raises doubts about previous remuneration, which need to be answered,” Mr. Paterson added.
The fines and the related case documents represent “a smoking gun” that false submissions were made for the LIBOR and EURIBOR, said Lianne Craig, partner at the law firm Hausfeld LLP in London. Hausfeld is representing institutional clients in the on legal proceedings in connection with LIBOR manipulation.
“It's clear that Barclays was not acting in isolation,” Ms. Craig said.
The investigation was conducted by the U.S. Department of Justice, the Commodity Futures Trading Commission and the U.K.'s Financial Services Authority. It is part of a much broader probe into misconduct by banks in setting LIBOR and related rates; the investigations involve regulators in the U.S., U.K., European Union, Switzerland, Canada and Japan.