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Twenty banks under scrutiny over rate rigging

 

Friday 29 June 2012 09:45 EDT
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The Prime Minister said that Mr Diamond, pictured, had 'very serious questions to answer'
The Prime Minister said that Mr Diamond, pictured, had 'very serious questions to answer' (AFP/Getty Images)

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Britain's biggest banks are facing the prospect of criminal investigations, enormous fines and civil lawsuits from customers over the developing scandal of rigging interest rates.

The Prime Minister urged banking regulators to use "all th e powers at their disposal" to pursue Barclays after it was fined £290m for manipulating bank lending rates. David Cameron suggested Bob Diamond, the chief executive of Barclays, had "very serious questions to answer".

Mr Diamond, who earned £17m last year, is under intense pressure to resign over the scandal. At the time of the manipulation he was running the part of Barclays believed to be responsible for the deals.

Last night it emerged that at least 20 other banks are under investigation including HSBC, which was run at the time by the current Trade minister, Lord (Stephen) Green, and the Royal Bank of Scotland, whose chief executive was Fred Goodwin, Lloyds, UBS and CitiGroup.

A City firm run by the former Tory treasurer and donor Michael Spencer could also be dragged into the scandal. Icap has suspended one employee and placed two others on administrative leave as part of the global inquiry into the manipulation.

Regulators are now actively pursuing individuals involved in the scandal, and are liaising with the Serious Fraud Office.

This could lead to criminal charges, while the Financial Services Authority is understood to be considering fining some of those involved and banning them from the City.

Authorities in the United States are also pursuing criminal investigations that could lead to the extradition of Barclays employees and traders from other banks. As part of the civil settlement agreed with Barclays this week, the bank is required to fully co-operate with that investigation.

The banks, whose manipulation of interbank lending rates resulted in the alteration of home mortgage rates, could also face legal action from consumers who may have paid too much for their loans.

The scale of the scandal and the potential fines and losses spooked investors, with more than £10bn wiped off the value of British banks.

In a letter to Andrew Tyrie, the chairman of the Commons Treasury Select Committee, Mr Diamond said last night that Barclays had not met "the high standards that we set for ourselves".

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