Libor Manipulation Should Be Criminal Offense, EU's Michel Barnier Says

EU Official: Libor Manipulation Should Be Criminalized

BRUSSELS, July 9 (Reuters) - Europe's top regulatory official intends to propose new rules that would criminalise the manipulation of benchmarks such as Libor, a spokesman for the EU commissioner in charge of financial reform said on Monday.

Michel Barnier wants to amend proposed market-abuse legislation that is designed to clamp down on insider trading and other wrongdoing to include the manipulation of a reference such as Libor, which is a basis for lending and derivatives contracts around the world.

"We need to draw lessons from the Libor case," a spokesman for Barnier said. "We intend to close the regulatory gap in our proposed market-abuse legislation by including the direct manipulation of market indexes such as Libor."

As it stands, the market-abuse proposal, which is now being negotiated with the European Parliament and EU member governments, defines insider dealing and market manipulation as criminal offences and lays down minimum penalties.

A global investigation into manipulation of interbank lending rates widened last week with Britain's fraud squad taking up the case.

Authorities in the United States, Europe, Japan and Canada are examining more than a dozen big banks over suspected rigging of Libor (the London Interbank Offered Rate).

British-based bank Barclays has so far been the only bank to admit wrongdoing, agreeing last week to pay a fine of more than $450 million.

The Libor rates, compiled from estimates by large banks of how much they believe they have to pay to borrow from each other, are used to determine interest rates on trillions of dollars in contracts around the world.

The European Commission proposes legislation that would apply across all 27 countries in the European Union. The bloc's member states and the European Parliament must give approval before it can take effect. (Reporting by John O'Donnell; editing by Rex Merrifield)

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