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September 27, 2017

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UK bank Barclays to settle allegations with US$453 mil. payment

WASHINGTON/LONDON -- UK bank Barclays will pay US$453 million to U.S. and British authorities to settle allegations that it manipulated key interest rates, increasing pressure on other banks to cooperate in a probe that could cost the financial industry billions of dollars.

The settlement raises fresh questions about the reliability of the London interbank offered rate, or Libor, which underpins some US$360 trillion of loans and financial contracts.

The attempted manipulation, which according to authorities took place from 2005 through 2009, meant that millions of borrowers paid too little or too much interest on their debt.

The U.S. government implicated senior executives at Barclays in its settlement. It cited reams of emails that showed how the bank sought to move Libor rates to profit on trades and to hide its high borrowing costs during the financial crisis.

Barclays Chief Executive Bob Diamond acknowledged on Wednesday that the settlement would damage customer trust in the bank. He said he and other senior executives would forgo their bonuses this year. Much of the improper trading and manipulation occurred under the watch of Diamond, a fixed-income trader who replaced John Varley as CEO in 2011.

Libor underlies everything from derivatives trades to U.S. consumer credit card rates to loans as far afield as those financing Turkish phone networks. Barclays also tried to manipulate Euribor, a separately managed series of euro-denominated rates.

The bank settled on a civil basis with the U.S. Commodity Futures Trading Commission, the U.S. Department of Justice and the UK's Financial Services Authority. The Justice Department is still conducting a criminal investigation.

The broader Libor probe dates to at least 2011 and includes Japanese, Canadian and Swiss authorities.

Last year, Swiss bank UBS AG agreed to cooperate with U.S. investigators in exchange for conditional immunity from prosecution. Earlier this year, in court documents filed in Ontario Superior Court, a Canadian antitrust regulator said that a "cooperating party" had provided information on how the alleged Libor manipulation took place.

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