Barclays Bank is to pay a 290 million pound fine following an investigation by UK and US regulators into manipulation of inter-bank lending rates.
The bank's top executives, including Chief Executive Bob Diamond, have agreed to waive their bonuses this year as a result.
City watchdog, the Financial Services Authority (FSA), said Barclays' regulation breaches were "serious, widespread and extended over a number of years".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
It accused the bank of having inadequate systems and controls in place until June 2010 and of failing to review its systems and controls at a number of appropriate points.
The FSA's portion of the fine, £59.5m, is the biggest fine the FSA has ever handed down.
Had the bank not co-operated with it, the fine would have been £85m, the regulator said.
The remainder of the penalty is owed to the U.S. Commodity Futures Trading Commission and Department of Justice.
Barclays staff were found to have manipulated submissions for the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor) to benefit the bank's interest rate derivatives traders.
The FSA also said Barclays had reduced its Libor submissions during the financial crisis as a result of senior management's concerns over negative media comment.
Libor and the Euribor are benchmark reference rates that indicate the interest rate that banks charge when lending to each other.
The FSA's investigation details the following exchange over email when 'Trader C' requested low one month and three month US dollar LIBOR submissions at 10:52 am on 7 April 2006, shortly before the submissions were due to be made:
"If it's not too late low 1m and 3m would be nice, but please feel free to say "no"... Coffees will be coming your way either way, just to say thank you for your help in the past few weeks".
A Submitter responded "Done...for you big boy".
Tracey McDermott, acting director of enforcement and financial crime, said the integrity of rates such as Libor and Euribor was of fundamental importance to both UK and international financial markets.
"Firms making submissions must not use those submissions as tools to promote their own interests," she said.
"Making submissions to try to benefit trading positions is wholly unacceptable; this was possible because Barclays failed to ensure it had proper controls in place.
"Barclays' behaviour threatened the integrity of the rates with the risk of serious harm to other market participants," she said.
Barclays Chief Executive, Bob Diamond, said he was sorry that "some people acted in a manner not consistent with our culture and values".
"To reflect our collective responsibility as leaders, Chris Lucas, Jerry del Missier, Rich Ricci and I have voluntarily agreed with the board to forgo any consideration for an annual bonus this year," he said.
Price manipulation is a severely damaging issue and confidence of clients can be lost quickly when price transparency is brought into question, according to Joshua Raymond, Chief Market Strategist at City Index.
"This is an embarrassment for Barclays and ultimately could lead to the banks clients asking questions about whether they themselves have been mistreated also and start shopping around for alternatives," he said.
-
Inheritance tax reforms: government urged to rethink curbs on rural reliefsMPs want the government to delay changes to inheritance rax reliefs for farmers
-
‘I’m among the thousands of millionaires leaving the UK – the new tax rules don’t make sense ’MoneyWeek spoke to a serial entrepreneur who is leaving the UK following the abolition of the non-dom tax status
-
Britain’s most-bought shares w/e 12 AugustNews A look at Britain’s most-bought shares as of 12 August, providing an insight into how investors are thinking and where opportunities may lie.
-
Activist investing: forget hedge funds, leave it to private investorsOpinion Demands from “activist investor” hedge funds are every bit as short-termist as the management teams they are trying to shake up, says Matthew Lynn. Private investors will take a long view.
-
Banks pass stress testFeatures Britain’s seven biggest lenders have passed the second round of annual stress tests – but how resilient are the tests?
-
Barclays gives its boss the bootFeatures Barclays has fired its CEO Antony Jenkins after three years on the job. He will be replaced by the chairman, John McFarlane, on an interim basis.
-
Barclays shrinks investment bankNews Barclays is still struggling with their investment banking arms following another round of disappointing results.
-
New technology is threatening the big banks, but there's one that's still worth buyingFeatures Mobile and online banking are making traditional bank branches obsolete. But one bank in particular is still a buy, says Matthew Partridge.
-
BNP and Barclays misbehave
News Regulators in America have levied heavy fines on the banks for breaching its rules.
-
Don’t be tempted to buy banks – here are two better optionsFeatures Bank shares might look cheap right now, but don't be tempted. There are better places to put your money, says Ed Bowsher. Here, he picks two stocks to consider instead.
