US bank bosses set for tough Libor questions

This week's earnings reports to put American managers in the dock

American bank bosses are set to be questioned on what they knew about Libor rate-rigging and how much the scandal could cost their institutions.

Analysts and investors in Libor panel banks Citigroup and Bank of America get their first chance to quiz management since the £291m Barclays settlement when they report earnings this week. The results come after a new estimate that says banks could end up paying $14bn in regulatory fines and legal settlements.

The whole affair took further twists late last week when it turned out that US Treasury Secretary Timothy Geithner wrote to Bank of England Governor Sir Mervyn King warning that there might be "deliberate misreporting" of Libor. Mr Geithner was Sir Mervyn's counterpart of the New York Federal Reserve bank.

Sir Mervyn faces the Treasury Select Committee on Tuesday, where he might also be asked what he knew about suggestions in 2007 that Lloyds Banking Group's Libor submissions appeared artificially low. Such actions can distort market lending rates.

The risks are rising for other banks that have not yet settled the multiple criminal and regulatory investigations into Libor around the world, according to Glen Schorr, banking sector analyst at Nomura. In response to JPMorgan Chase's results last Friday, Mr Schorr expressed surprise that the bank had not increased its legal fighting fund. "We note that the second quarter results did not include any litigation reserve builds, which we expect to increase given the potential risks of the scandal," he said.

JPMorgan Chase, Citigroup and BofA are the three US banks on the panel that submits estimates of their borrowing costs for inclusion in the daily Libor averages, which underpin trillions of dollars of derivatives contracts and affect interest rates for everyone from mortgage and credit card holders to small businesses. Mr Schorr predicted it could be several years before the full cost of the scandal is known, because as well as regulatory investigations there are also multiple lawsuits in the US from investors alleging they lost money on derivatives because of the manipulation.

Morgan Stanley estimated on Friday that between them, the 11 largest banks which contribute Libor submissions could have to pay out $14bn, knocking between 2 per cent and 33 per cent from Citigroup's and BofA's earnings per share this year. Citigroup is due to report its second quarter results early tomorrow, with BofA following on Wednesday.

The question of how much regulators knew about Libor manipulation during the credit crisis in 2007 and 2008 could be raised, too, by politicians when Ben Bernanke, chairman of the Federal Reserve, gives his semi-annual testimony to Congress on Tuesday and Wednesday.

News
people'It can last and it's terrifying'
Sport
Alexis Sanchez, Radamel Falcao, Diego Costa and Mario Balotelli
football
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
News
people Emma Watson addresses celebrity nude photo leak
PROMOTED VIDEO
Sport
footballFeaturing Bart Simpson
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Infrastructure Lead, (Trading, VCE, Converged, Hyper V)

£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering