Barclays has been fined $92.8m (£59.5m) by the UK Financial Services Authority (FSA) for misconduct relating to the Libor and the Euribor, the largest fine ever imposed by the UK watchdog.
The bank has also been hit with fines in the US. The Commodities and Futures Trading Commission (CFTC) imposed a fine of $200m while the US Department of Justice fined the bank $160m.
An investment banker told SRP that the settlement between the bank and the regulators could trigger new class action law suits which could cost the industry billions of dollars.
According to the UK and US regulators, Barclays attempted to manipulate the benchmark interest rates in order to benefit the bank's derivatives trading positions by either increasing its profits or minimising its losses.
The Libor benchmark is a set of benchmarks designed to indicate the rate at which banks estimate they are able to lend to each other and is used as the reference rate for an estimated $350 trillion in financial products, from over-the-counter derivatives, to mortgages and bonds.
"Barclays' misconduct was serious, widespread and extended over a number of years," said Tracey McDermott, acting director of enforcement and financial crime at the FSA. "The integrity of benchmark reference rates such as Libor and Euribor is of fundamental importance to both UK and international financial markets. Firms making submissions must not use those submissions as tools to promote their own interests."
The FSA said that Barclays failed to have adequate systems and controls in place relating to its Libor and Euribor submissions processes until June 2010. Additionally, it had failed to review its systems and controls at a number of appropriate points.
On the other side of the Atlantic, the CFTC has ordered Barclays to pay a $200m civil monetary penalty, as well as requiring that Barclays desists from further violations.
The CFTC said that Barclays sought to manipulate the Libor and Euribor benchmarks for two reasons: To boost profits or minimise losses on big swaps positions which prompted traders to request both high and low quotes from the bank's Libor submitters; and to avoid standing out from other Libor panel banks during the financial crisis when high quotes could have been seen as evidence that an institution was experiencing liquidity problems.
"The American public and our markets rely upon the integrity of benchmark interest rates like Libor and Euribor because they form the basis for hundreds of trillions of dollars of transactions and affect nearly every corner of the global economy," said David Meister, director of enforcement at the CFTC. "Banks that contribute information to those benchmarks must do so honestly. When a bank acts in its own self-interest by attempting to manipulate these rates for profit, or by submitting false reports that result from senior management orders to lower submissions to guard the bank's reputation, the integrity of benchmark interest rates is undermined."
Both the FSA and the CFTC refused to provide further details on the identity of the "other banks" involved in the orders, or provide a figure for the number of institutions that were observed to have been coordinating their Euribor fixings with Barclays.