Regulators probing alleged manipulation of a key interbank lending rate have focused their demands for information and interviews on five global banks, according to people familiar with the investigation.
UBS, Bank of America , Citigroup and Barclays have received subpoenas from US regulators probing the setting of the London interbank offered rate, or Libor, for US dollars between 2006 and 2008.
Investigators have also demanded information from West LB, although the bank said it had not received a subpoena.
Several witnesses have been interviewed by UK and US regulators and criminal investigators. They are examining whether rates were manipulated immediately before and during the financial crisis. At the time, some commentators complained that Libor rates did not reflect the real market.
The investigation’s scope has narrowed in recent months. Last autumn, all 16 members of the committee that helped the British Bankers’ Association set the dollar Libor rate during 2006-08 received informal requests for information.
Libor, which measures the rate banks charge each other, is used as a reference for about $350,000 billion in financial products, making it one of the world’s most closely watched indices.
Investigating agencies include the US Securities and Exchange Commission, the Commodity Futures Trading Commission, the US Department of Justice, the UK Financial Services Authority and the Japanese Financial Supervisory Agency.
UBS disclosed on Tuesday that it had been subpoenaed by three US agencies and also received an information request from Japan. The regulatory agencies and other banks involved declined to comment.
The BBA sets daily Libor rates for short-term borrowing in 10 currencies over 15 periods – ranging from overnight to 12 months. The association surveys banks about the rates at which they believe they can borrow “in a reasonable market”.
The top and bottom quartile of reported rates are dropped, with the average of the remainder used for index purposes. During the financial crisis, the US dollar Libor rate for three-month lending surged to 5.72 percent in September 2007 and 4.81 percent in October 2008.
The spread between banks that took part in the daily survey also widened to more than 50 basis points as concerns about counterparty risk and credit quality increased. At the time, the weakest banks came under pressure after revealing they were borrowing at much higher rates, implying a lack of market confidence in the integrity of their operations.