Royal Bank Subpoenaed in LIBOR Probe
The Canadian Press – October 26, 2012
There are reports that Royal Bank of Canada has been served with a subpoena from U.S. state officials as part of their probe into the possible manipulation of a key benchmark used to set interest rates.
The Wall Street Journal and other business publication report the subpoenas were issued to nine banks, including RBC, in August and September, according to an unidentified person familiar with the investigation.
That brings to 16 the number of banks served with subpoenas, including seven that had become public earlier.
The U.S. investigation by the New York and Connecticut attorneys general is part of a wider probe in several countries that stems from a major U.K. bank’s admission that it had provided false information used to set the LIBOR rate.
RBC is Canada’s largest bank, with operations in major financial centres around the world including London.
The bank said last summer that it followed the rules in submitting information for compiling the London Interbank Offered Rate, which is used widely as a benchmark to set interest rates on business and consumer debts.
That assurance was repeated Friday in RBC’s response to the news reports.
“We have determined that our Libor submissions reflected our cost of funds,” said Gillian McArdle, head of communications for Canada at RBC Capital Markets.
The rate is set by gathering information from a small number of large banks, using a system that’s intended to prevent any one member of the group from manipulating the rate.
Questions about how LIBOR is operated arose after Barclays Bank agreed to pay a record $450 million fine to settle allegations its traders had manipulated submissions to LIBOR.
While Barclays actions by themselves were probably insufficient to affect LIBOR, there authorities in Britain and elsewhere have launched probes to see if it was a more widespread problem.
Canada’s competition bureau and other Canadian regulatory bodies launched their own probes in light of the Barclay’s revelations but there have been no allegations levelled against RBC.