FSA Investigation into LIBOR

Lord Higgins Excerpts

Monday 2nd July 2012 Lords Chamber

[Lord Sassoon]

My Lords, if the noble Lord will hear me out, we know that there was attempted manipulation from the evidence that has already been made public. I do not know on what basis the American authorities have come to that conclusion, and it may just be semantics, but the authorities are currently investigating whether LIBOR was actually manipulated.

It is also worth bearing in mind that, in the case of Barclays, it was the dollar LIBOR rate and not the sterling LIBOR rate that was the subject of the attempted manipulation that has come out. I completely agree with the noble Lord, Lord Myners, that these investigations need to carry on, but we cannot come to any conclusion about the answer.

Lastly, I answered a question about the fine last week, but I will repeat it in summary. This is the largest fine that the FSA has ever handed down, which indicates the seriousness of this matter within a UK context—the US has a completely different approach to the way it imposes penalties. The most important and relevant point is that this is the largest ever fine in the UK handed down by the FSA.

[Lord Higgins]

My Lords—

[Lord Elystan-Morgan]

My Lords—

--- Later in debate ---

[Lord Sassoon]

My Lords, I am sure that the FSA will listen to the analysis given by the noble Lord, Lord Elystan-Morgan; and if it has not already got to the bottom of it, it will take his points on board. The authority is acutely aware that it needs to press on, but the noble Lord, Lord Turner of Ecchinswell, has made it clear that it is very difficult, which is why the FSA seems to be taking the lead on this.

[Lord Higgins]

My Lords, it would seem that Barclays’ defence is, “We had to cheat in order to preserve our reputation”. That suggests that the bank is seriously misguided in the way it looks at these matters. Certainly there is a case for a parliamentary investigation, which I support. It is equally true that we should be absolutely clear that the terms of reference are the right ones for such an investigation.

If I may, I will make a very narrow point. As I understand it, the proposal is that the Joint Committee should be chaired by the Member for Chichester, Mr Tyrie, for whom I have the very greatest respect. However, as I was myself chairman of the Treasury Committee for some 14 years, I question whether it is appropriate that his energies should be diverted from the Treasury Committee, where he is doing an excellent job, by being chairman of this authority. This is too heavy a burden for one person, however talented, to take on, and we ought to consider that point.

[Lord Sassoon]

My Lords, on my noble friend Lord Higgins’ first point, there were two distinct periods during which Barclays was found to have attempted its manipulation. The first period was before the financial crisis, when its traders appear to have been driven by pure greed and tried to drive rate up. The second period was during the financial crisis when the preservation of Barclays’ reputation seemed to be the main driver and it was attempting, it seems, to move the interest rate down. I think there were those two distinct motivations.

Regarding the committee chair, notwithstanding the suggestion that the chair of the Treasury Committee chairs the Select Committee, I would guess that the formal position is that the committee itself will decide who the chair will be. I imagine that this will be taken up either in the Motion itself, in which case your Lordships will have a chance to take a view on it, or the committee will decide who the chair will be in due course.