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Barclays hit with £290m fine for interest rate manipulation

CEO Bob Diamond acknowledged the settlement would damage trust in Barclays

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Barclays is to pay a fine of £290 million to UK and US financial regulators after authorities uncovered evidence the bank manipulated the London interbank interest rate, Libor.

Demands are mounting for Barclays chief executive Bob Diamond, who said he would forego his bonus this year, to resign. So far Diamond, who is the highest paid man in banking, has not responded.

Barclays agreement to pay the fine now raises the pressure on other banks believed to be involved in the interest rate manipulation to cooperate in a probe that could cost the financial industry billions of dollars.

The settlement raises fresh questions about the reliability of Libor, which underpins some $360 trillion of loans and financial contracts.

The attempted manipulation, which according to authorities took place between 2005 and 2009, meant that millions of borrowers paid too little or too much interest on their debt.

The US government implicated senior executives at Barclays in its settlement. It cited reams of emails that showed how the bank sought to move Libor rates to profit on trades and to hide its high borrowing costs during the financial crisis.

Diamond acknowledged on Wednesday that the settlement would damage customer trust in the bank. Much of the improper trading and manipulation occurred under the watch of Diamond, a fixed-income trader who replaced John Varley as CEO in 2011.

Libor underlies everything from derivatives trades to US consumer credit card rates to loans as far afield as those financing Turkish phone networks. Barclays also tried to manipulate Euribor, a separately managed series of euro-denominated rates.

The bank settled on a civil basis with the US Commodity Futures Trading Commission, the US Department of Justice and the Financial Services Authority. The Justice Department is still conducting a criminal investigation.


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