LONDON — More global banks are being investigated in the reported financial-market manipulation that led to fines of $453 million against Barclays Bank, British Treasury chief George Osborne said Thursday, driving financial stocks lower.
The day before, U.S and British regulators fined Barclays for manipulating the London interbank-offered rate to its advantage between 2005 and 2009. The rate is used to price mortgages and consumer loans.
Osborne said Barclays was not the only bank to be involved in market-fixing. There are investigations in several countries involving, among others, Citigroup in the U.S., Switzerland’s UBS and Britain’s HSBC and Royal Bank of Scotland.
The banks’ share prices fell sharply as investors expected hefty fines and tighter regulation. Barclays shares closed down 15.5 percent, Royal Bank of Scotland 11.5 percent, HSBC 2.6 percent and Lloyds Banking Group3.9 percent.
UBS shares fell 2.4 percent and Citigroup shares fell 2.6 percent.
Britain’s Financial Services Authority cited evidence that Barclays traders were, in some cases, in touch with people in other banks.
“Banks were clearly acting in concert,” said Andrew Tyrie, a British lawmaker who is chairman of the influential Treasury Committee in the House of Commons. “I fear it’s not going to be the end of the story, that we are going to find that other banks have been involved.”
Tyrie said his committee would summon Barclays chief executive Bob Diamond to explain what happened at the bank.
Though Diamond has decided to waive his 2012 bonus in the wake of the fines, he’s facing calls to step down.
“If Bob Diamond had a scintilla of shame, he would resign,” said Matthew Oakshott, a member of the House of Lords. “If Barclays’ board had an inch of backbone between them, they would sack him.”
Prime Minister David Cameron, when asked whether Diamond should resign, said he thinks “the whole management team have got some serious questions to answer. Let them answer those questions first.”
The fines are unlikely to be the end of the pain for Barclays. The cost of related lawsuits will likely be bigger, said Sandy Chen, banking analyst at Cenkos Securities.
“Since Royal Bank of Scotland, HSBC and Lloyds Banking Group have also been named in lawsuits, we expect they will also face significant fines and damages. We are penciling in multiyear provisions that could run into the billions,” Chen said.
The London interbank-offered rate is an average rate set by banks each morning that measures how much they’re going to charge one another for loans. That rate, in turn, affects returns on complex products such as interest rate derivatives contracts.
“These contracts may sound exotic but they are the bread and butter of our financial system and are used by businesses and public authorities every day, and they affect the mortgage payments and loan rates of millions of families and hundreds of thousands of firms, large and small,” Osborne said.
The U.S. Justice Department said Barclays would not face criminal prosecution, subject to certain conditions, but individual employees or officers could be prosecuted.
Diamond waived any bonus for this year, as did finance director Chris Lucas, Chief Operating Officer Jerry del Missier and Rich Ricci, the chief executive of corporate and investment banking.
Martin Taylor, who was chief executive officer of Barclays between 1995 and 1998, told BBC radio that he thinks Diamond should stay if he can “help clean out the stables,” that only the board can make that judgment.
The traders involved in the manipulations worked in Barclays Capital, the investment bank that Diamond headed between 2005 and 2009.
Taylor said he was confident that Diamond hadn’t sanctioned the misbehavior in the unit but added that the company’s culture might have been a factor behind the misdemeanors.
Business, Pages 29 on 06/29/2012