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Three Britons arrested in Libor rigging investigation

The Serious Fraud Office has made its first arrests in connection with an investigation into the rigging of Libor, the inter-bank lending rate.

Three British men were held after the SFO, working with City of London Police, searched two homes in Essex and one in Surrey.

The three are understood to be Thomas Hayes, who has worked at several institutions including UBS and Citigroup, and Terry Farr and Jim Gilmour, who are understood to work for RP Martin, a broker which facilitates trading between banks and other financial firms.

The SFO would only say that three men, aged 33, 41 and 47, were taken to a London police station.

Libor is used to price a huge range of financial contracts, including some mortgages.

It is based on an average of the rates at which various banks on a panel say they expect to pay to borrow money from other banks. There is a different panel for each currency.

Mr Hayes was a trader specialising in yen. As brokers, the other two would have been able to pass messages between traders at different banks.

None of the firms the men worked for were prepared to comment yesterday.

The Libor scandal has led to scores of traders across the City being either disciplined, suspended or sacked.

Barclays bank has already been fined £290m for Libor rigging in a move that cost the former chief executive, Bob Diamond, his job.

Royal Bank of Scotland (RBS) and HSBC are also being investigated over allegations of fixing the key interest rate.

The SFO has devoted at least 40 staff to the investigation over the past few months.

The Government recently proposed legislation to bring Libor under financial regulators and to make its rigging a criminal offence.

Libor, which was designed in the late 1960s to estimate the costs at which banks will lend to each other, has become the key benchmark for around $550trn of loans and financial contracts.

Switzerland's UBS and Britain's RBS are expected to reach similar financial settlements shortly. More than a dozen banks are being investigated.