Libor Fixing Scandal: Global Regulators Spur Rate Reviews from Tokyo to Toronto [VIDEO]

Barclays may be the first bank to settle for a record fine with some US and UK regulators for manipulating the London Interbank Offering Rate (Libor) between 2005 and 2009, but this is only the tip of the iceberg.

The scandal has unfurled a more widespread problem and questions into how Libor is calculated and set and government investigators around the world are currently conducting probes on a number other institutions as well as Barclays.

While Barclays settled with the US Department of Justice (DoJ), the U.S. Commodity Futures Trading Commission (CFTC), the UK's Financial Services Authority (FSA), the bank is still under investigation in other jurisdictions, such as Switzerland.

As the rigging scandal has opened a can of worms into the who global interest rate setting area, which is mainly self-reporting and monitoring, IBTimes UK takes a look at what different governments, regulators and central banks are doing to tackle the situation.

UNITED KINGDOM

The FSA confirmed that seven other banks are currently under investigation in relation to manipulating Libor through submissions falsification.

Tracey McDermott, acting director of enforcement and financial crime at the FSA told the Treasury Select Committee (TSC) that while it was unlikely that there would be any criminal prosecutions of those implicated in the market manipulation, the British regulator is investigating seven lenders that are "not all British banks" but could not identify the firms as the "investigations are still on-going."

Meanwhile, the Serious Fraud Office (SFO) confirmed to the IBTimes UK that is formally investigating Barclays and other undisclosed banks and individuals for criminal activity in relation to Libor rigging. Although the SFO is investigating to see if it can criminally prosecute individuals at institutions, critics have said that it is either too difficult or unlikely that it will be able to launch criminal proceedings, just because civil proceedings have been successful.

Bank of England (BoE) governor Sir Mervyn King and his colleagues at the central bank have come under fire for their involvement and management during and after the period that Barclays was found to be manipulating Libor.

However, King said to the TSC that he will put the discussion of Libor on agenda of central bankers at Basel meeting in September this year and that legal contracts should recognise that there may not always be a reference benchmark interest rate.

Since the hearing, King sent a memo to senior central bankers, which are part of the Economic Consultive Committee (ECC) as "it is very clear that radical reforms of the Libor system are needed," said the note seen by Reuters.

US

Although UK's King has called on central bankers to discuss Libor reforms, US central bankers and regulators have hit back at the UK.

"They took some modest reforms in response to our suggestions in 2008 [referring to a letter Geithner sent to King], but they didn't go far enough," said US Treasury Secretary Timothy Geithner. "And we have now taken the initiative to set up a broader effort involving all the countries that matter around the world, that have a big stake in this, to try to make sure we push [for reforms]."

US regulators are continuing an "on-going investigation" into several other unidentified banks, after the CFTC revealed that one of Barclays' traders tried to align Libor manipulation strategies with at least four other firms' traders.

Federal Reserve chairman Ben Bernanke confirmed that regulators, including the CFTC and U.S. Securities and Exchange Commission (SEC), are still investigating.

"There's any number of enforcement agencies, including the DoJ, CFTC, SEC and foreign and state regulators, looking at this," said Bernanke as a US Senate Committee hearing. "I'm sure that they will apply the law appropriately."

Meanwhile, US states New York and Connecticut launched a probe into the possible manipulation and fixing of Libor by several global banks over six months ago, while the US Justice Department is also building criminal cases against several financial institutions and their employees, according to media reports.

New York Attorney General Eric Schneiderman's spokesman confirmed to Reuters that the state had launched a probe into possible rigging of the key global interest rate.

"Working together, the New York and Connecticut attorneys general have been looking into these issues for over six months, and will continue to follow the facts wherever they lead," said New York Attorney General spokesman James Freedland to Reuters.

He also added that Schneiderman, along with Connecticut's Attorney General George Jepsen, started the investigation six months ago.

Meanwhile, the New York Times cited unnamed official sources that the U.S. Justice Department is building criminal cases against several financial institutions and their employees in relation to Libor fixing activities, but a conclusion could "take years and end in settlements rather than indictments [as the] investigation is unusually complex."

CANADA

As US, UK and other regulators around the globe ramp up efforts to stage a Libor setting reformation, Canadian officials have jumped with possible alternatives to the global lending benchmark rate.

"If it's [Libor] structurally flawed and can't be fixed, which is a possibility, there may need to be different types of approaches, and we need to think that through," said Mark Carney, the Canadian central bank governor and head of the global Financial Stability Board. "It's not just a question of the structure of the index, which Bernanke rightly described as flawed, but it's the active, conscious, repeated manipulation of that index."

Analysts say part of the problem with Libor is that banks are asked to submit only an estimate of what they think they can borrow at, which automatically builds flexibility and self-reporting into the calculation.

Carney has suggested that one solution to replace Libor would be via "market-based rates" like Canada uses, the Canadian Dealer Offered Rate (Cdor).

"Cdor actually has some attraction, because... it's actually a borrowing rate that is used by banks on a regular basis," said Carney.

Meanwhile, Canada's Competition Bureau confirmed earlier this year that it is working with international regulators in the Libor probe and that it's looking at half a dozen Canadian subsidiaries of international banks involved in so-called yen-Libor.

EUROPE

In Europe, central banks and regulators will be ramping up efforts to address the current way Libor is calculated and investigate most banks, not just Barclays, when it comes to rate manipulation.

According to reports by Reuters and the Financial Times (FT), traders at Deutsche Bank, HSBC, Societe Generale and Credit Agricole are currently under investigation for interest-rate manipulation as part of a global probe.

Citing unnamed sources and with no confirmation or comment from the people or the banks themselves, Reuters and the FT said that regulators are investigating the possible roles of Michael Zrihen at Credit Agricole, Didier Sander at HSBC and Christian Bittar at Deutsche Bank.

Philippe Moryoussef, has also apparently left his derivatives trading post in Singapore with Nomura, as he is also under investigation for the time he period he spent working for Barclays, which was between 2005 to 2007.

Meanwhile, in the court papers filed in New York and with the Singapore High Court, Tan Chi Min, the former head of delta trading for RBS's global banking and markets division in Singapore, alleged that managers condoned its staff to set the Libor rate artificially high or low to maximise profits.

Tan was sacked for gross misconduct from RBS in November 2011 because, he claims, he was made a "scapegoat" for malpractice condoned by managers.

He is currently suing for wrongful dismissal and within the claim, he names five staff members that he alleges, made requests for the Libor rate to be altered and subsequently, three senior managers knew the situation while the practice 'was known to other members of [RBS]'s senior management'.

Despite central bank and regulatory officials looking to address the Libor fixing scandal, by implementing a major reformation or a deployment of another method, the Swiss National Bank (SNB) is said to be sticking to Libor as a reference rate, despite the scandal.

Currently, the SNB is the only major central bank that uses Libor as a policy benchmark due to its economic relevance and because "it could not be manipulated by individual participants in the market", said SNB Chairman Thomas Jordan in a book he wrote in 2007, the year he joined the governing board.

However, while some other regulators, such as those in the UK and US, launched investigations into the manipulation of Libor around towards the end of the last decade, the SNB launched an investigation into concerns over the accuracy of Libor during the financial crisis but it came to the conclusion there was no systematic distortion of the franc Libor.

While Barclays may have settled with US and UK regulators, it is still under investigation in some jurisdictions, including Japan and so are many other banks.

JAPAN

Japan has been quietly pioneering the mission to crack down on banks that have been falsifying interbank lending rate submissions over the last two years and is now looking to tighten controls further.

The Japanese Bankers' Association (JBA) revealed that is considering a review of as many as 16 banks to make sure they're following the lobbying group's guidelines for submitting honest and accurate submissions for yen-denominated Tokyo interbank offered rates (Tibor).

Hisanao Aoki, a spokesman for the association, confirmed that all reference banks may be reviewed for how they submit rates in the "offshore" market for Tibor rates, known as euro-yen Tibor. Meanwhile, Japanese lawmaker and former Morgan Stanley banker Tsutomu Okubo is said to be heading a panel examining these firms and will call on the JBA to explain how Tibor is set.

In Japan, reference banks, including Mitsubishi UFJ Financial, JPMorgan and Deutsche Bank, submit their interbank offered rates in a similar self-reporting and operating fashion to how Libor is set.

However, JBA calculates the Tibor benchmark rate, while the BBA compiles the data and passes it onto Thomson Reuters, which is the designated calculation agent for BBA LIBOR.

Data submitted by panel banks into the BBA Libor process is received and processed by Thomson Reuters and the data is calculated using guidelines provided by the FX&MM Committee.

According to the JBA website, the reference banks submit their Tibor rates to the JBA, which in turn compiles them and sets a benchmark. The JBA Tibor is calculated by the JBA as a prevailing market rate based on quotes for 13 different maturities (1 week and from 1 month to 12 months) provided by reference banks as of 11am each business day.

Much like BBA Libor calculations, the JBA excludes the top two and the bottom two reference rates for each maturity and takes the average of the remaining rates.

Over the past year, Japanese regulator SESC has cracked down on banks that have been seen to manipulate or attempt to rig the Tibor rate.

Katsunori Nagayasu, the former JBA chairman said in February this year that the group may take measures to improve the way the JBA compiles Tibor, much like the BBA, following the Financial Services Agency's (FSA) penalties for Citigroup and UBS.

While the news about Barclays has sent the Western financial world into a tailspin as regulators confirmed many other banks are still under investigation, Japanese regulators have already suspended some bank's operations, such as Citigroup and UBS, after the Securities and Exchange Surveillance Commission (SESC) found that some staff attempted to manipulate Tibor rates.

SOUTH KOREA

In South Korea, the financial regulator has started an investigation into alleged interest rate rigging and collusion to manipulate certificates of deposit (CD), which is used as a benchmark to set lending rates, by some of the country's banks.

Kookmin, Shinhan, Woori, and Hana are the banks being investigated.

In South Korea, brokerage firms also use a self-reporting system, much like the setting on Libor, which means they report CD rates twice a day. A CD is a way of saving with a fixed interest rate and maturity sold by banks and circulated in the secondary market by brokerages.

Much like Libor, Euribor and Tibor, the CD rates are also used as an indicator of financial firms' financial health.

SINGAPORE

In Singapore, RBS is still under close scrutiny, as it still has an on-going case from sacked ex-senior RBS trader Tan Chi Mi, which directly lands the bank into the middle of a Libor manipulation and collusion case.

This month, RBS revealed it had ended its contribution to Singapore's interbank lending rate panels, following a review of its markets business that has seen it withdraw from setting other such reference rates in Asia.

According to Thomson Reuters, Bank of America and RBS did not appear on a daily page published by the Libor calculation body that lists contributors to Singapore's U.S. dollar and local currency interbank lending rates, also known as SIBOR.

"During the course of this review, we have decided to end our contribution to the rate setting panels for SIBOR in Singapore," said a RBS Spokeswoman

BofA declined to comment on its contribution to SIBOR.

Much like Libor and Tibor, which uses banking associations to compile the submissions, Singapore uses the Association of Banks in Singapore (ABS), which compiles the rate with the assistance of Thomson Reuters, which also collects submissions from participating banks.

SIBOR is an interbank lending reference that affects both savings deposit rates and mortgages in Singapore.

HONG KONG

The country's main banking lobby, the Hong Kong Association of Banks (HKAB) and the country's effective central bank, has said it will review both the structure and the fixing mechanism in its key benchmark lending rate known as Hibor. The review, supported by the Hong Kong Monetary Authority, will focus on the 20 contributing banks, although HKAB has said it has "not observed any anomaly in its operation" in the twenty-plus years that Hibor has been in place.