Saturday July 21, 2012
Banks in Libor probe consider group settlement
ZURICH: A group of banks being investigated in an interest-rate rigging scandal are looking to pursue a group settlement with regulators rather than face a Barclays-style backlash by going it alone, people familiar with the banks' thinking said.
Such discussions are preliminary, and it is unclear if regulators will enter these talks, aimed at resolving allegations that banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins hundreds of trillions of dollars in contracts.
Still, there are powerful incentives for the banks to enter joint negotiations.
Barclays Plc was the first to settle with US and British regulators, paying a US$453mil penalty and admitting to its role in a deal announced on June 27. Its chief executive Bob Diamond abruptly quit the next week, bowing to public pressure and erosion of the bank's reputation.
The sources told Reuters that none of the banks involved now want to be second in line for fear that they will get similarly hostile treatment from politicians and the public. Bank discussions about a group settlement initially took place before the Barclays agreement, and picked back up in the aftermath.
It is unclear which banks are involved in the potential settlement talks. More than a dozen banks are being investigated in the scandal, including Citigroup, HSBC, Deutsche Bank and JPMorgan Chase. They all declined to comment.
A group agreement would appeal to financial watchdogs because they would be able to announce a headline-grabbing figure, showing that they were dealing firmly with the banking industry's misdemeanors, a banker told Reuters on condition of anonymity.
Earlier this year, five top US banks negotiated a US$25bil settlement with the US Justice Department and other federal and state agencies to resolve allegations of mortgage services abuses.
The main obstacle facing such a group settlement is a hesitancy on the part of the investment banks to work together in the fevered atmosphere surrounding the Libor investigations. Negotiations and haggling could drag on for some time and a resolution was far from certain, the banker said. - Reuters