March 17, 2011 / 4:50 AM / 9 years ago

Five banks in Libor probe: source

LONDON (Reuters) - Regulators probing alleged manipulation of Libor rates, the benchmark for interbank borrowing costs, have been focusing on five lenders, a person familiar with the matter said on Thursday.

Bank of America, Citigroup, Barclays, WestLB and UBS are being investigated by regulators in the United States, Britain and Japan, the source said, who asked not to be named.

Swiss bank UBS on Tuesday said it had received subpoenas from U.S. and Japanese regulators regarding whether it made “improper attempts” to manipulate the London Interbank Offered Rate.

Thursday’s Financial Times, citing people familiar with the investigation, said BofA, Citi and Barclays had all received subpoenas from U.S. regulators. Investigators had also demanded information from Germany’s WestLB, although the bank said it had not been subpoenaed, the paper said.

Regulators contacted by Reuters declined to comment.

Barclays, WestLB and Bank of America would not comment and Citi could not be reached.

Regulators are investigating the setting of dollar Libor prices in 2007 and 2008, just before and during the financial crisis.

The British Bankers’ Association (BBA) sets Libor prices each day, providing a benchmark that reflects the interest rates being used by the world’s major lenders.

The BBA said Libor has a straightforward and transparent calculation method which excludes any rates that are significant outliers. It declined to comment on the investigation.

Thomson Reuters compiles and publishes the data on behalf of the BBA. Reuters News is part of Thomson Reuters.

Libor is calculated by banks contributing the rate at which they expect term funding to be offered between prime banks at 1100 GMT. Sixteen banks contributed to the dollar rate in 2008, and the lowest and highest four contributions are discarded and the remaining rates averaged.

Libor rates spiked during the financial crisis but were criticized at the time for not reflecting true market prices. In December 2008 the BBA said it would enhance governance and scrutiny procedures on the data, and earlier this year four more banks were added to contribute to the dollar rate.

Additional reporting by Kathrin Jones in Frankfurt, Sakthi Prasad in Bangalore; Editing by Douwe Miedema and Vinu Pilakkott

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