In addition to masking true crisis-time borrowing costs, keeping overnight interest rates artificially low or unfairly high could have also helped banks keep payments on derivatives like interest rate swaps from spiking, while also stopping consumer financial products like adjustable rate mortgage rates from rising.
Meanwhile, the manipulation of the rate may have minimized the banks payments due to corporations and municipalities who swapped fixed rate debt payments for floating rate contracts.
Breuer credited Barclays with its efforts in assisting the DoJ's Criminal Division in an ongoing investigation of "individuals and other financial institutions," related to market manipulation.
"The events which gave rise to today's resolutions relate to past actions which fell well short of the standards to which Barclays aspires in the conduct of its business," said Barclays chief executive Bob Diamond in a statement. "I am sorry that some people acted in a manner not consistent with our culture and values," Diamond added. He and top executives Chris Lucas, Jerry del Missier, Rich Ricci said they will forgo any annual bonus as a result of the violations."The American public and our markets rely upon the integrity of benchmark interest rates like LIBOR and Euribor because they form the basis for hundreds of trillions of dollars of transactions and affect nearly every corner of the global economy," said David Meister, the CFTC's Director of Enforcement. The New York Times reports that regulators are looking into whether banks violated so-called 'Chinese Walls' between their trading desks and treasury units to collude in manipulating lending rates. In the process of setting short-term rates, trading desks and treasury departments are supposed to interact at an arms length; however, emails uncovered by regulators in Barclays settlement cast doubt on that process. For instance, in a 2007 interaction that regulators uncovered, a Barclays trader asked a treasury employee tasked with submitting BBA rates to manipulate that process. "Pls set 3
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