Libor Rate Faces Review Amid Barclays Scandal
An urgent independent review into the inter-bank lending rate is to be set up by the Government next week following the interest rigging scandal.
The review will consider the future operation of the Libor rate and the possibility of introducing criminal sanctions, a Treasury source said.
Bob Diamond, the chief executive of Barclays - the first bank to be exposed in the scandal - has been summoned to appear before the Treasury Select Committee next Wednesday.
Prime Minister David Cameron said issues like whether bank bosses would be questioned under oath would have to be "carefully considered".
He said: "There's no need to make a snap judgement, but I think it's very important above all that the government takes all of the actions necessary - holding bankers accountable, making sure they pay their taxes, making sure there's proper transparency, making sure the criminal law can go wherever it needs to to uncover wrongdoing, all of those things need to happen.
"On the issue of inquiries...let's think this through, let's get this right, that's what I'm determined to do and that's what we will do."
The inquiry announcement comes as Ed Miliband called for a full-scale public inquiry into banking culture and practices as the City was rocked by two major scandals in the space of a week.
The Labour leader said the industry was plagued by an "institutional corruption" that could only be eradicated by introducing a tough new code of conduct and jail sentences for immoral bankers who abuse the system.
His comments were echoed by Bank of England Governor Sir Mervyn King who demanded a "real change in culture" as Britain's lenders were left reeling following a week blighted by controversy.
Mr Miliband pushed for a 12-month probe to "find out what is going on in the dark corners of the banks" after the FSA uncovered "serious failings" in the sale of complex financial products to small businesses, just days after the rate-rigging affair emerged at Barclays.
In an interview with The Times, Mr Miliband said: "There hasn't been a proper reckoning for what happened in the banking crisis. The bankers told us - it's all fine, we've cleaned everything up. But I'm afraid that doesn't hold water anymore."
Calling for a systemic look at the customs and practices of the industry, he added: "We've got to have an open, independent inquiry with hearings to find out what is going on in the dark corners of the banks.
"Some of it clearly was illegal, but it goes well beyond that.
"There is a problem with how people operate. This isn't just about regulation, it's also about culture and ethics."
Mr Miliband said the inquiry - set up with cross-party support - would be asked to draw up a bankers' code of conduct going beyond the "narrow" professional standards enforced by the Financial Services Authority (FSA).
Calling for the worst offenders to receive prison sentences, he added: "It should be about probity, honesty, integrity. Bankers should be struck off if they do the wrong thing...this is not a victimless crime."
Sky's Business Correspondent Alistair Bunkall says: "The government is under pressure to announce a Leveson-style independent inquiry.
"Instead they've gone for an independent review into the particular sector of banking that has been affected by this scandal: the LIBOR rate.
"The advantage of this will be speed and cost. Both the Prime Minister and Governor of the Bank of England say they know what is wrong and what needs to be fixed.
A full-scale independent inquiry would be lengthy, but it would be transparent and in-depth, and that would help satisfy an angry public."
Sir Mervyn said he believed a Leveson-style inquiry was not needed, but slammed conduct in the industry.
He said: "From excessive levels of compensation, to shoddy treatment of customers, to a deceitful manipulation of one of the most important interest rates and now news of yet another mis-selling scandal we can see we need a real change in the culture of the industry."
He added that hard-working bank staff have been "let down" and that banks now needed "leadership of an unusually high order".
The Financial Services Authority (FSA) revealed earlier that Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group had agreed to pay compensation to customers who were mis-sold interest-rate hedging products.
Some 28,000 of the products have been sold since 2001 and may have been offered as protection - or to act as a hedge - against a rise in interest rates without the customer fully grasping the downside risks.
The findings come after Barclays was fined £290m by UK and US regulators for manipulating the rate at which banks lend to each other, and echoes the costly payment protection insurance (PPI) mis-selling scandal that emerged last year.
Banks are facing the threat of a criminal investigation over fixing the interbank lending figures that affect millions of homeowners and small firms.
The Treasury has started to look at strengthening criminal sanctions for those responsible for market abuse after the FSA exposed the dealings at Barclays on Wednesday.
Serious Fraud Office investigators are in talks with the regulator over the scandal, while pressure is mounting on Barclays chief executive Mr Diamond to stand down.
Mr Miliband described the Barclays fiasco as "the unacceptable face of capitalism," and called on Mr Diamond to step down.
David Cameron had said the Barclays' chief executive had "questions to answer", but Mr Diamond, who was head of the bank's investment arm at the time of the allegations, reportedly told a meeting of analysts at US bank Morgan Stanley that he would not resign.
The American banker, who waived his bonus for 2012 in light of the claims, has agreed to appear in front of the Treasury Select Committee to account for his bank's actions.
HSBC and taxpayer-backed RBS are among several other lenders being investigated by the City watchdog for trying to influence the Libor and Euribor interbank lending rates to boost their profits.
Meanwhile, RBS boss Stephen Hester waived his 2012 annual bonus following the IT fiasco that caused major problems for thousands of NatWest customers.
Banks Question Barclays Chair's BBA Role
UK Banking Culture 'Must Change'
CBI Boss: Barclays Scandal 'Deplorable'
what do you think?
If we low life plebs are convicted of commiting a crime, a crime which has brought us wealth ie. drug sellers pimps they are not only sentenced to imprisonment but also they have all their ill gotten gains siezed. For it is a fact and quite rightly so that in law no one should be able to profit from illegal activity. Will the government and the police therefore confiscate Mr Diamond's; and all those others invovled; assets. I doubt it. Wake up and smell the British Tea people we are bieng made fools of by our so called betters. We who go crying all the way to the bank only to be laughed at. If ever we needed a Cromwell it is now.
Do you have an proof that Mr Diamond has acted illegally Libel itself is an act against this country laws Are you not the kettle calling the pot black
Let's have an enquiry to see if he has broken the law. Isn't that the whole point? Or is it because he's a tory, that you instantly jump to his defence.
Agree with you Terry, one rule for them.. what we don't need now is yet another enquiry! Time for some backbone from the gov and prosecutions made.
Sunny Bee. Backbone from our plastic PM. I have seen worms with more spine than the pathetic figure that thinks he runs this country. Nothing will be done about this scandal involving the banks, the same as nothing was done last time or the time before that.
Say the word 'ethics' and bankers think of a county to the north of London! They were exposed almost 5 years ago so why haven't any of them been prosecuted, jailed, and their assets sequestered? You don't have to break my window and steal my DVD player to be a thief ... if you're sneakier and call yourself a banker you can steal my money instead ... and when you're caught the wonderful politicians will throw more of my cash at you to fund your next few 'bonuses' ... which you pay yourselves for doing what? Essentially, absolutely nothing, unless you count devising yet more ways to con people out of their cash! They are crooks; jail them and return their ill-gotten gains to the taxpayers who actually worked for the money!!!
Dave It possibly has very little to do with your or the general public money - most of the 28 thousand cases seem to be for loans between 350k and 50 million to businesses, most of whom should have known better or taken legal advice before singing up to the deal The term Buyer be ware seem to spring to mind Unfortunately some still have a romantic view of banks which have been hard nosed businesses for decades Too many people will sign anything to obtain the loan required without looking into the small print on the back I for one have been guilty of this
Oh, that's alright then Michael. For a minute , there, i thought the banking system was actually corrupt. You've made me feel better now, knowing that the Barclays i have my savings in, is not the same company that is being accused of manipulating LIBOR for it's own ends. Thanks a lot.
It has always been the way in this country that theft is only a crime if your of the wrong social standing. Get caught stealing a loaf of bread and historically the crime was punished severely, while crimes against the poor were ignored or celebrated. Today if your caught defrauding a financial institute the punishment is swift, look at the Nick Leesons of this world, but if the same institution is caught robbing the workers of the UK then that's ignored and covered up. A banking regulatory body is needed with clear rules that are in such plain English that no amount of twisting and wriggling can change the meanings and the regulatory body needs the power to close down institutions who are breaking these rules.
We dont need anymore enquiries or codes of practices we need criminal prosecutions. The whole establisment is calling for action but they all stop short of actual prosecution. Two days ago Milliband was calling for police action now its changed to a long useless enquirey. If he was sincere the labour party could have taken out a private prosecution on behalf of millions of his supporters who have been miss sold, even if this action was unsuccesful it would gain him massive support.Who has watered him down? Is there a secret Gov. run by bankers and the judiciary who meet in secret venues who use this country as their personal pot of gold. the law as we know it is moribund and benign in this matter.We are in the hands of unknown masters.
if its theft and fraud by the rich and powerfull its enquries all year long. if its theft or fraud by the working class its court; trial, and prison.wake up england!
Agree Russell and your last few sentences are food for thought. I too increasingly get the feeling that our nation is sleepwalking into a very very dark place and I speak as someone who has always been sceptical about conspiracy theories.
Labour had the opportunity to have a public enquiry and regulate the banks five year ago Having taken 50 billion a year in tax revenue they chose not to upset the cash flow Having failed to do anything then the Hypocrite now wants a public enquiry now Just a cheap political gimmick on his part What is required is robust regulation on banks
Michael. A bit harsh methinks although I agree totally that Brown was so enthralled by the amount of tax collected from the City for him to waste that the wonder chancellor let them do whatever they liked.
Unfortunately we have a corrupt political system - Politicians are more interested in getting re elected than looking after the good of the country. We have has 13 year of a labour government giving the public what they want to ensure re election without any regard as to how it would be paid for. If governments and their splinter organisations were a business it would not last the first year of trading Last week a labour peer in the house of Lords criticised his own party for failing to regulate the banks - several hours later he issued a statement saying he got it wrong - I assume he had a call asking him if he wished to keep taking his allowance When was the last time you heard an opposition party member agreeing with the party in power Until political parties put the interests of the electorate and country before their political career things will not change Should MPs be restricted to only 2 terms in Parliament and then be banned from public service Should elections be held so 20% of seats are up for grab every year
Aren't you forgetting who started the ball rolling, by giving the bankers a free hand. Your friend and no one elses, Maggot Thatcher.Typical tory memory, only goes back to the days when they were left out in the cold. Well don't give that warm coat to the charity shop yet (as if a tory would) you'll need it in 2 years time.
Dave, it was Thatcher who instigated the " do what you like " system that the Tory bankers swiftly followed.Brown was lazy, in not bringing in reform, but the original crime that gave us our present financial crisis, as well as this latest debacle, was committed by the evil old witch, none other.
Michael. You are right when you speak of the short term politics we suffer today. All that matters to them is getting elected next time and sod the country. I like the idea of 20% of the seats up for grabs each year which might keep them a bit more honest
aa aa. Try looking beyond party politics for a while. This short termism reaches across the whole of the political spectrum to the detriment of the country. They ALL put themselves first with the absolute priority being re election. On top of that Thatcher hasnt been near power for 22 years so those who complain about the present shower blaming the Labour govt of 2 years ago are being hypocritical in blaming a politician from over 20 years ago.
Thatcher and Ronald Reagan set the foundations for the corrupt Bankers to prosper it is their fault it is only now the sxxt has hit the fan.
wait for it some socialist will now bring up pole tax and the 100% increase in community charge during labour reign being Thatchers fault
Miliband calls the world of banking corrupt! Thats rich coming from a politician. Surely the answer is to stop ALL bonus payments. Give a standard rate for the job and if employees fail to perform to the standard, sack them. You could argue that we would loose the "best people" but if the current state of affairs is anything to go by, we ain't got them now. Any public enquiry will cost you and I money and at the end of it, we will see nothing for it.
You cannot sack anybody for anything. If an employee does not perform, he/she blames the employer for stress or making them do extra tasks. If the employer does in fact sack them for failing to perform, they then take time off sick and take the employer to a tribunal and sue the employer for unfair dismissal. Don't you just love employment laws.
Hi Eric, Sack incompetent employees ? Not a chance thanks to the employment laws introduced by Millblands predecessors. Peter is spot on. Everyone is a victim and must be helped. It is never anyones fault, people are not junkies or drunks they have drug & alcohol issues etc etc
Typical labour party reaction "we don't know what to do lets have a public enquiry to make people think we are doing something". They must have lots of friends in the legal profession to siphon public money of to. What is needed is action because it's well past the stage of enquiry. Sent in selected teams, find the culprits and strip their assets and use the money to support what the country needs. This would hurt them more than jail. .
Possibly the banks are not doing anything that is technically illegal - Just Immoral The regulator after decades of doing nothing is now looking for fairness - years ago if you did not read the small print - the term buyer be ware was always quote This is no longer the case, with modern pressure selling it is now seller be ware, if they fail to provide adequate information
Michael you may be right and nothing illegal has been done. When it comes to morals the banks are no different from most of us. The idea is to take positive direct action to find out and not to pay a lot of expensive lawyers to write a report with recommendations that nothing will be done about. PPI and the latest interest based product scam are not illegal and are not really the banks fault. The people who bought them should have read the agreement before signing. I was always taught to read everything before signing and never sign if you don't understand.
So we just by pass the law then, eh Peter. Put the drink down, pal.
Seems everybody thinks this fraud but the government. How can we get it so wrong?
How has a fraud been comitted? LIBOR is an interbank rate and is set by a committee of Banks. So who has been defrauded? Certainally not you or I........
Are you saying that manipulating LIBOR, to make the banks performance appear stronger, and thus enhance bonuses, is not fraudulent. Sorry , matey, but it's fraudulent in everything but name. It needs to be addressed, and the Tories behind it , locked up.( Don't try and tell me , these were labour supporting bankers, just don't ).The customers have been misled.
Millibland is usually a band wagon jumper but in this case he is absolutely right. A public enquiry is essential to clear out this cesspit once and for all. Pity the House of Westminster didn't have a public enquiry to investigate the MP's expenses scandal instead of setting up a civil servant led cover up under Sir Chris Kelly. They even sent gorbals Mick, the man who did most to try and keep it secret to the Lords
When the richest in the land made themselves exempt from tax and punishment a couple of hundred years ago in France, they ended up losing their wealth and their heads.
John you need to finish what you started You still have the very rich in France running the country You still have the middle classes You still have the poor Nothing has changed, others have moved in to fill the voids left by the removal of Aristocracy You have a new "Royalty" a new elite in the country based on cash, families like the Rothechilds as you do in other countries America you have the Kennedy clan and the new rich like Bill Gates
12.30 pm - should get some posts from the socialist shortly, they will now be getting out of bed after a night on the cheap cider paid for out of the benefits
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i'm here still fighting
Here's one socialist, just walked in the house, after a 50 hour working week. You try to stereotype people, yet it's you and your mates around the trough who are stereotypically Tory. To say a socialist, is an unemployed scrounging boozer, is pretty pathetic, even for a fat capitalist tory. Though hardly unexpected, as it's the kind of tripe you lot fling about , when your city chums are caught at it again, and again. This time it's a big one, and they are cleaning out a nice little cell, for when we get the enquiry finished.
aa aa. You complain bitterly about sterotyping and then immediate do exactly the same thing. Relax sunshine and dont let tongue in cheek comments wind you up so easily Chill man
how about a comment on this site from a BANKER or have they all fled to south america ???
been on ed miliband page on f ace book . some one as put a link to a vid on YouTube . Osborne admitting the uk has the lowest debt in the G8 . and labour never over spent and a lot more go and look for your self Tory boys. who looks a fool now
Wonder where the Labour party propaganda machine found the Osborne look alike ? And before you go rushing to the barricades Stephen its a tongue in cheek remark
so Dave Osborne says it him self and you still don't believe it
Dave the labour party never put the link up
Methinks: firstly, this is all going to cause even more stressful relations betwixt the banks and government leading to who-knows-what-kind of political fighting. Furthermore, if, say, they were to take legal actions against any bankers then this will lead to, them losing their jobs, some friends of the government and probably politicians taking over those bank jobs, then eventually, they will find some other way of manipulating the exact same libor whatever-that-rate-is. Presumably, it will then not be called a libor but some other name, The Government Control Over Banks Internal Exchange Rate Mechanism. The new politicians-taken-over-the-previous-bank-jobs will then manipulate the libor replaced by the GCOBIERM using precisely the same methods as before except, they will then give themselves far more bonuses, pensions etc. I do agree, it isn't very good to sell people investment products without properly explaining how much money they can lose. We don't know they didn't actually explain it sufficiently or not, do we?
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This comment has been removed for violations of our Terms and Conditions.
ronniewood99 - it's not to South America that they have fled - it's to South Amnesia!
screw the banks. take all yr money out + stick it back under the bed where its safe and these 2 faced lying csum bags cant get their greasy mitts on it
Is this not what the FSA gets paid for ? They have been taking the money and have failed to deliver for years It was the Americans who picked this up