The New York Times's Dealbook is reporting that the American Justice Department is in the process of putting together criminal charges for a number of banks and traders involved in the Libor fixing scandal, including Barclays.
Although the bank will hope that its admission of culpability, which resulted in a £290m fine from US and UK regulators – as well as it becoming, perhaps unfairly, the focus of public opprobrium for a scandal which involves far more banks than it alone – will lead to leniency, it crucially does not actually shield employees from prosecution. In addition, the other banks – and Dealbook reports up to ten are being investigated – do not even have that defense.
With civil actions, regulators can impose fines and force banks to overhaul their internal controls. But the Justice Department would wield an even more potent threat by bringing criminal fraud cases against traders and other employees. If found guilty, they could face jail time.
Throughout much of Wall Street and the City, there is a growing fear that the Libor scandal could be used as face-saving exercise by authorities embarrased that they failed to meaningfully prosecute anyone over misselling – and worse – in the run-up to the financial crisis. And Dealbook argues that:
The Libor case presents a potential opportunity for prosecutors. Given the scope of the problems and the number of institutions involved, the rate-rigging investigation could provide a signature moment to hold big banks accountable for their activities during the financial crisis. "It’s hard to imagine a bigger case than Libor," said one of the government officials involved in the case.
Although the Schadenfreude in seeing top bankers in the dock would be palpable, it seems distasteful for regulators to seek a crime to fit the punishment. If the libor scandal is criminal, it needs to be prosecuted as such; but if the Justice Department does so partially out of their own pride, then that is not the route by which justice is done.