France has launched an investigation into the alleged collusion regarding the interbank interest rate Libor based on a lawsuit filed by a shareholder of Societe Generale, a judicial source said on Monday.
Libor is crucial for a wide range of financial instruments that form the core of the international financial system. It is used worldwide and affects the interest rates that banks, companies, and individuals pay for borrowing money. Euribor is a similar instrument in the eurozone. The Paris public prosecutor opened a preliminary investigation in September, the source said.
The prosecutor claims that Libor was ‘manipulated’, said his lawyer Frederick-Karel Canoy. Traders from Societe Generale were also involved, which affected the stock price, according to the lawyer of an unnamed shareholder of Societe Generale.
The scandal reached its peak when British and American regulators imposed a fine of £290 million (€363 million) on the British bank Barclays for attempting to manipulate the interbank rates Libor and Euribor between 2005 and 2009. British Barclays is the only bank that has been penalized so far, although it is estimated that at least 15 banks worldwide are under investigation for possible Libor manipulation.
Libor is calculated on a daily basis based on banks’ estimates of the rates at which they can borrow from other banks. Meanwhile, it has been established that this mechanism is susceptible to abuse and that some traders lie about borrowing costs to strengthen their trading positions or to present their bank as a safer business partner.
