LIBOR Investigations Continue Beyond Barclays (NYSE: BCS)

The LIBOR scandal that rocked global financial markets this past summer has largely disappeared from the news, though the investigations continue and may soon entwine more banks.

After the allegations of price fixing in the LIBOR market emerged, it quickly cost Barclays CEO Bob Diamond his job, and the vitriol subsided quickly thereafter. Now, a state investigation into whether some of the world’s biggest banks manipulated key global interest rates has widened to 16 institutions, according to a source familiar with the matter.  Sources state that New York state Attorney General Eric Schneiderman issued subpoenas to nine banks in late August as part of an investigation into alleged manipulation of the London Interbank Offered Rate (LIBOR), which is a critical interest rate for not only interbank lending, but also on consumer loan pricing across the globe.

The Libor process generates rates, based on a survey of banks, that are used as benchmarks for roughly $10 trillion of loans and some $350 trillion of derivatives. In June, U.K. bank Barclays (NYSE: BCS) admitted to manipulating the LIBOR rate and market to appear stronger during the financial crisis and to benefit its traders’ positions. As part of a settlement with U.S. and U.K. regulators, the bank agreed to pay $453 million.

A spokesman for U.K.-based Lloyds said in a statement that the bank was “assisting various regulators in their ongoing investigations. And a spokesman for WestLB, now known as Portigon, said the firm “continue[s] as always to help the regulators in any enquiries they may have.” Royal Bank of Canada spokeswoman Rina Cortese said RBC had “determined that our Libor submissions reflected our cost of funds,” meaning the bank did not attempt to manipulate the rate. Citigroup is also said to be under investigation for its role in the LIBOR market, but the bank has declined comment at this time.

Schneiderman is leading the investigation along with Connecticut state Attorney General George Jepsen. The two have also been in contact with a number of their counterparts in other states.

“The investigation can now be described as a large, well coordinated multistate investigation that includes Attorneys General throughout the U.S.,” Jaclyn Falkowski, a spokeswoman for Jepsen, said in a statement. “A primary focus of the multistate’s [sic] investigation is to identify whether state and municipal issuers with financial instruments pegged to Libor and other benchmark interest rates have been harmed by the alleged conduct and, if so, to seek recovery of those taxpayer funds.”