Have big banks manipulated lending rates?

New York – Have US and European big banks jointly rigged lending rates? According to the Wall Street Journal, US investigators suspect that banks have artificially kept a high interest rate low. Investigations centered on Bank of America, Citigroup and UBS, according to the magazine.

News / Finance

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It’s about the Libor. This is determined in London and serves as a reference interest rate in so-called interbank trading. Interest rates for car loans or corporate bonds are based on it. If Libor is manipulated, it will have a global impact.

Each morning, to calculate the Libor, banks report those interest rates to London that they have to shell out themselves to borrow money. From this, a section is then formed. And this is exactly where the banks are said to have manipulated: The investigators suspect, according to the newspaper, the suspicion that some institutions have denied themselves and their own interest rates collectively too low. All this should have happened in the years 2006 to 2008.

The background of the action was the gathering financial crisis. At that time, the market participants were very eyeing at what conditions the banks refinanced. If a bank had to borrow money at significantly higher interest rates than the competition, that was a bad sign. Observers could assume that difficulties were imminent.

According to the Wall Street Journal, interest rates reported by Bank of America, Citigroup and UBS were strikingly close. The Swiss UBS has already acknowledged in its Annual Report 2010 that it has been contacted by authorities on suspicion of Libor manipulation. All three major banks had experienced existential difficulties during the financial crisis.

The Financial Times had already reported on the investigation in March. In the period in question, a total of 16 banks were involved in the determination of the dollar Libor, including Deutsche Bank and WestLB. In addition to the US Securities and Exchange Commission and the US Department of Justice, according to information from the “Financial Times”, the authorities in the United Kingdom and Japan are investigating the suspicion of interest rate manipulation.