Barclays is one of 16 major banks that set benchmark interest rates known as LIBOR, or the London Interbank Offered Rate. The rate is supposed to be calculated on the average borrowing cost of the banks, and it is used to determine interest rates on financial contracts worth trillions of dollars in global markets.
Barclays, according to the settlement agreement, submitted low numbers from 2007 to 2009 to avoid the appearance that it was in financial difficulty and needed to pay more than its competitors to borrow money. From 2005 to 2009, Barclays also changed its numbers to benefit positions that its traders had taken in the markets.
Barclays believed that other banks were disguising their borrowing costs and that the published benchmark rates therefore did not reflect the true costs of borrowing funds.
The manipulated rates had an impact on anyone investing in financial contracts linked to the benchmark.
“As a result of Barclays’ misconduct, government entities and not-for-profits were defrauded of funds that otherwise could have been used to benefit the people of New York,” state Attorney General Eric Schneiderman said in a press release announcing the settlement.
About $93 million will be put in a settlement fund to pay restitution. The rest will be used to pay expenses of the investigation and for other uses.
Barclays is a multinational banking and financial services company headquartered in London. The bank maintains an office in New York City and Barclays Capital has its principal office there.
Barclays cooperated with the investigation and it is the first of several banks under investigation to settle claims.