Fed concerned about LIBOR issues back in 2007

The US Federal Reserve showed concerns about LIBOR issues as early as 2007 and even began a shoulder-to-shoulder analysis with Barclays in 2008 that ended in reform recommendations to UK authorities, according to a report today by Reuters.

According to the news agency, a New York Fed spokesperson said in a statement that "in the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and emails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with LIBOR.

"In the spring of 2008, following the failure of Bear Stearns and shortly before the first media report on the subject, we made further inquiry of Barclays as to how Libor submissions were being conducted. We subsequently shared our analysis and suggestions for reform of LIBOR with the relevant authorities in the UK."

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It was revealed at the end of last month that Barclays is paying a £290m fine to UK and US regulators after it was found attempting to control submissions for the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR) to benefit the bank's interest rate derivatives traders. LIBOR and the EURIBOR are benchmark reference rates that indicate the interest rate that banks charge when lending to each other.

The scandal has caused the resignation of several top executives at the British bank including now ex-Chief Executive Officer Bob Diamond. Today's report seems to be line with Diamond's testimony to the House of Commons that there was an industry-wide awareness of the issue, despite the fact that Diamond swore that information of Barclays's traders' own wrong-doings did not go beyond the desk supervisor.

JM