U.S. officials were told in April 2008 that banks were possibly underreporting their London interbank offered rate submissions, according to documents released on Friday by the Federal Reserve Bank of New York.
The possibility that some banks were underreporting their Libor to avoid appearing weak was found in anecdotal reports and mass-distribution emails, including from Barclays, the New York Fed said Friday in a news release. This was also found in a December 2007 phone call with Barclays noting that reported "Libors" appeared "unrealistically low," the New York Fed said.
On April 11, 2008, a Barclays employee told an analyst from the New York Fed Markets Group that his company was underreporting its rate and that he thought other banks were doing the same. That same day, analysts at the Markets Group reported on the questions surrounding the accuracy of the British Bankers' Association's Libor fixing rate in their regular weekly briefing note.
The briefing note cited reports from contacts at Libor participating banks that banks were underreporting borrowing rates to avoid revealing any weaknesses. This report was circulated to senior officials at the New York Fed, the Federal Reserve Board of Governors, other Federal Reserve Banks and the Treasury Department.
New York Fed officials met in late April and in May 2008 to discuss what steps could be taken to address these problems. Officials also met with representatives from the British Bankers' Association, which sets the rate, to express their concerns.
The documents released were requested by Rep. Randy Neugebauer, R-Texas, who is chairman of the oversight and investigations subcommittee of the House Financial Services Committee. He had requested all transcripts that related to the communications with Barclays regarding the setting of Libor from August 2007 to November 2009.
More than a dozen banks, including JPMorgan Chase (JPM) and Citigroup (NYSE:C), are under investigation for possibly manipulating their Libor submissions. The British bank Barclays has admitted that it provided inaccurate information about its own borrowing costs, which was used to help calculate Libor.
