UK orders bank review, calls Diamond to panel

Sat Jun 30, 2012 10:22am EDT
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By Avril Ormsby

LONDON (Reuters) - The British government ordered an independent review into the workings of key lending rates between banks, after Barclays (BARC.L: Quote) was found guilty of rigging them, and summoned the bank's boss to answer questions about the scandal.

U.S. and British authorities fined Barclays $450 million for manipulating the London Interbank Offer Rate (Libor), the interest rate on loans that banks make to each other. Barclays was the first to settle in an investigation that is expected to name others and reaches across Europe, Japan and North America.

The scandal has fuelled public outrage at the culture and practices of the banking industry and prompted calls from lawmakers across the political spectrum for an inquiry.

The British government plans a short, urgent review that would allow it to amend the Financial Services Bill currently going through parliament, a spokeswoman for the Prime Minister said. The review will examine Libor and the possibility of criminal sanctions.

"The person leading the review will want to talk to those involved, the Bank of England, the FSA (Financial Services Authority) and people who use Libor," Mark Hoban, financial secretary to the Treasury, told BBC television.

Prime Minister David Cameron, asked about a full public inquiry, told BBC television: "Let's take our time, think this through carefully...Let's get this right."

A public inquiry would be a risky step for a government already under fire over a string of embarrassing revelations in a year of public hearings following 2011's phone-hacking scandal.

The chief executive of Barclays, Bob Diamond, has been summoned to appear before British lawmakers on Wednesday July 4 to answer questions about the scandal.   Continued...