FSA 'knew about Libor issues in 2008'

6 March 2013

The Financial Services Authority (FSA) knew banks were manipulating Libor some three years before launching an investigation into the matter, it has emerged.

Yesterday (5 March), the UK financial regulator published the findings of an internal audit into its conduct and admitted that it was aware of unscrupulous behavior with regard to this key interbank rate as far back as 2008.

The FSA revealed there had been 26 separate occasions when the practice of lenders using Libor incorrectly by "lowballing" their rates were raised with members of staff, with these concerns leading to 48 "red flag" communications among FSA officials on all levels.

Even though the manipulation of the figure may have been going on since before the onset of the global economic slump, the report insisted the body had not been aware of traders fixing rates to benefit their positions before beginning to scrutinize the matter in 2011.

Lord Turner, chairman of the FSA, said the organization "did not respond rapidly to clues that lowballing might be occurring" because it had "no formal regulatory responsibility" for Libor at that time.

By Asim Shah

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