One of the London-based companies that helped the world’s biggest banks rig a key interest rate that influences $300 trillion worth of global investments is preparing to settle with American and British regulators for less than $100 million, the Wall Street Journal reported Sunday.
ICAP PLC would be the fourth company to pay a settlement stemming from the scandal. Barclays, UBS, and the Royal Bank of Scotland have paid a combined $2.5 billion to resolve their own alleged roles in the rate rigging. About a dozen other firms continue to face investigations. The eight-figure settlement for ICAP would reportedly resolve investigations by the Commodity Futures Trading Commission (CFTC) in the U.S. and the Financial Conduct Authority (FCA) in the U.K., but the U.S. Justice Department intends to continue looking into firm’s role in the LIBOR scandal.
Regulators allege that ICAP functioned as a go-between for bank manipulation of what is known as the London Inter-Bank Offer Rate or LIBOR. By manipulating LIBOR, banks like Barclays and UBS were able to make a variety of financial transactions more profitable. U.S. taxpayers likely lost billions of dollars to LIBOR manipulation. One estimate put the total cost to investors from LIBOR rigging at $176 billion, but the complexities of how LIBOR is factored into various deals makes it difficult to tally the losses.
Market manipulation of this sort is apparently quite common. Since the LIBOR scandal broke more than a year ago, similar price rigging swindles have been uncovered in oil markets, foreign currency exchange trading, electrical utility pricing, industrial commodities like aluminum, and dozens of other markets.