Swiss authorities start probe on ‘interest rate fixing’ claims

ZURICH - Reuters

Employees are seen in front of the Credit Suisse headquarters in New York in this file photo. Credit Suisse is among the 12 banks which are being investigated in Switzerland. AFP photo

Switzerland said on Friday it was investigating 12 U.S., European and Japanese banks suspected of conspiring to manipulate interbank lending rates used to set interest rates on hundreds of trillions of dollars of securities.

The Swiss Competition Commission (COMCO) said it had received information of possible collusion between derivative traders concerning the London Interbank Offered Rate (Libor) and the Tokyo Interbank Offered Rate (Tibor).

“Derivative traders working for a number of financial institutions might have manipulated these submissions by coordinating their behavior, thereby influencing these reference rates in their favour,” COMCO said in a statement. Libor is derived from the rates that banks say they charge each other and is used worldwide as a benchmark for setting rates on about $350 trillion of derivatives and other financial products. Small changes in the rate can have large impacts on the amounts of interest that can be charged.

COMCO said those under investigation are Bank of Tokyo-Mitsubishi UFJ, Citigroup, Credit Suisse , Deutsche Bank, HSBC Holdings, JP Morgan Chase, Mizuho Financial Group, Rabobank Groep, Royal Bank of Scotland, Societe Generale, Sumitomo Mitsui Banking Corporation and UBS.

U.S., European Union and British regulators are also investigating whether banks understated interbank rates to reduce borrowing costs and downplay investor panic during the banking crisis.
“We are in contact with the U.S. Department of Justice and the EU Competition Commission,” said Olivier Schaller, a COMCO official. “At present we are focusing on the problems that appeared in the Swiss market. We are at the beginning of our investigation.”

Banks probed in other investigations but not included in the Swiss probe include Barclays, West LB and Bank of America.

“If we see others are involved then we will enlarge our investigation,” said Schaller.

Successive lawsuits

Last year a European asset manager sued a dozen U.S., European and Japanese banks, including Deutsche Bank, UBS and Credit Suisse, accusing them of conspiring to manipulate Libor.
Later in the year, Charles Schwab filed two similar lawsuits accusing 11 major banks of conspiring to manipulate Libor.

“We are taking these investigations very seriously and are fully co-operating with the authorities,” a UBS spokesman said.

In July last year UBS said it had been granted leniency or immunity by some authorities in return for cooperating in their Libor manipulation investigations.

Libor rates spiked during the crisis but were widely criticised at the time for not having risen enough to reflect real interbank prices.

Banking sources said there was political pressure to keep a lid on Libor during the credit crunch and banks were lobbied to keep the rate down.