Libor Fixing Scandal: FSA Denies Delay in Probe

The Financial Services Authority hit back at MPs' criticism that the regulator had been slow to act on investigating and stopping the manipulation of some of the world's most important interbank lending rates.

In a statement on the Treasury Select Committee website, the regulator revealed it will publish the internal review conducted by its audit division into when it first came to know about the Libor rigging by Britain's top banks.

In a response to an earlier-published preliminary report by the Treasury Select Committee on the scandal, the FSA denied criticisms by the parliamentary body that the watch dog was two years behind the US authorities to begin the formal investigation.

The FSA responded that it had been working in close collaboration with the US Commodity Futures Trading Commission (CFTC) since 2008. The regulator launched its own investigation into the scandal in 2010, two years after its US counterparts.

"We were aware of and engaged with the enquiries made by the US regulatory authorities during 2008 and 2009 and provided assistance to the CFTC from the outset of its investigation, by obtaining documents and information from Barclays," says the FSA.

In addition, the report said that the FSA was not serious on the market rumours related to the manipulation of the interbank rate, and blamed the regulator of taking a narrow view of its power to initiate criminal proceedings for fraudulent conduct.

FSA denied all the criticisms, but added that "there may be merit in considering further the scope of the Financial Conduct Authority's (FCA) powers in the future".

On April 1, the UK's new 'dual' regulatory regime will see the FSA split into the Prudential Regulation Authority (PRA) and the FCA.The FCA will have responsibility for consumer issues and conduct of business regulation, and will supervise all financial services institutions meaning that some firms will be dual regulated.

In June last year, Barclays became the first bank to be fined £290m ($441m, €333m) by US and UK authorities for manipulating Libor and Euribor. Following that, Swiss bank UBS and Royal Bank of Scotland were fined £940m and £390m respectively, in connection with the same scandal.

"It is only right that the FSA has had to shoulder its share of the blame for this scandal," the chairman of the Treasury Committee Andrew Tyrie said commenting on the response.

"The Treasury Committee will consider the FSA's review into its own awareness of inappropriate Libor submissions when it is finalised. Some of the evidence we heard suggests early warning signs may have gone unheeded."