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US regulator Commodity Futures Trading Commission said the way that the key LIBOR interest rate is set in the UK is still not clean and free of fraud.

“We have a lot more work to do,” said Gary Gensler, chairman of the Commodity Futures Trading Commission.

Gary Gensler suggested that the rate was often “completely made up”.

A number of banks have been fined hundreds of millions of pounds for rigging the lending rate.

Gary Gensler is in London to meet officials at the Financial Services Authority (FSA), the City watchdog.

LIBOR (London Interbank Offered Rate), which is set in London, is meant to reflect the average rate that banks pay to lend to each other and is used to benchmark everything from car loans and mortgages to complex financial transactions around the world.

Speaking of the scandal, Gary Gensler spoke of “pervasive rigging” and said authorities could not guarantee the rate is fraud-free, but refused to criticize the FSA or suggest that setting the rate should be moved to the US.

He also labeled the FSA a “terrific partner”, as the FSA defended itself against criticism of its role in the LIBOR scandal by MPs.

The LIBOR scandal emerged in June last year when UK and US authorities fined Barclays $465 million for fixing the key inter-bank interest rate. Since then, Swiss bank UBS and Royal Bank of Scotland have been given fines of $1.5 billion and $625 million, respectively.

According to the CFTC, which hit RBS with a $330 million fine, RBS made hundreds of attempts to manipulate the rates and succeeded on a number of occasions.

LIBOR is a benchmark interest rate set each day by the British Bankers’ Association (BBA). It is based on estimates received from 16 major international banks based in London of how much they must pay in order to borrow cash from other banks.

Gary Gensler compared the manipulation of rates to an estate agent trying to sell you a house.

“They are trying to reference the price of the houses in the neighborhood [when] there have been no transactions in the neighborhood and furthermore, the agent is not willing to share the data and is often just making it all up,” he said.

US regulator Commodity Futures Trading Commission said the way that the key LIBOR interest rate is set in the UK is still not clean and free of fraud

US regulator Commodity Futures Trading Commission said the way that the key LIBOR interest rate is set in the UK is still not clean and free of fraud

The BBA said it would not comment on Gary Gensler’s comments but said: “The BBA has strongly stated the need for greater regulatory oversight of LIBOR.”

It added that it was working closely with the government and regulators to change the system.

A government-commissioned review suggested taking the responsibility away from the BBA and placing it in the hands of an outside authority, such as a commercial body or an industry group.

UK’s MPs on the Treasury Committee published their report “Fixing Libor” in August, which said the FSA had failed to investigate market rumors of rate-rigging properly.

Responding, the FSA said it had been engaging with US authorities since 2008.

In its report of last year, the Treasury Committee blamed Barclays bosses for “disgraceful” behavior, which damaged the UK’s reputation, but was also critical of regulators.

It said the Bank of England had been “naive” about the possibility of Libor manipulation during the financial crisis and had been “relatively inactive”, but said the failure of the FSA to do its job and properly investigate the market rumors was far worse.

It said the FSA had not identified any “weakness in compliance” at Barclays, despite conducting numerous visits.

The FSA responded by saying it had increased the intensity of its supervision since 2008, focusing on firms’ control functions and board oversight, and that its successors – the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) – would build on this new approach to supervision.

The regulator also noted the committee’s concerns that it had been two years behind US regulatory authorities in initiating its formal Libor investigations.

But it said it had been aware of and engaged with the enquiries made by US regulators in 2008 and 2009 and had assisted the CFTC from the outset of its investigation. Once evidence of potential wrongdoing emerged it took more active steps, it said.

The committee had also accused the FSA of taking a narrow view of its power to initiate criminal proceedings for fraudulent conduct.

The watchdog denied this but said: “There may be merit in considering further the scope of the FCA’s powers in the future.”

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Martin Taylor, the former chief executive of Barclays, says the bank has engaged in “systematic dishonesty”.

It comes after Barclays was fined $450 million for trying to manipulate interest rates at which banks lend to each other.

Martin Taylor, who was chief executive of the bank from 1994 to 1998, said that Barclays’ deception looks like a deliberate strategy as it had been going on for years.

Other banks are also being probed.

The chief executive of Barclays, Bob Diamond, has come under pressure to resign.

Barclays has said its actions “fell well short of standards”.

In response, chief executive Bob Diamond and three other top executives at the bank are to give up their bonuses this year.

Investigators say that Barclays’ traders lied to make the bank look more secure during the financial crisis and, sometimes – working with traders at other banks – to make a profit.

Tracey McDermott, director of enforcement at the FSA, which imposed fines alongside the US financial regulator, said: “We have a number of investigations that are ongoing.

“Obviously we need to look at each case on its own particular facts but the initial indications are that Barclays was not the only firm that was involved in this.”

The US Department of Justice also said criminal investigations into “other financial institutions and individuals” was ongoing.

Martin Taylor, the former chief executive of Barclays, says the bank has engaged in "systematic dishonesty"

Martin Taylor, the former chief executive of Barclays, says the bank has engaged in "systematic dishonesty"

Other big names believed to be under investigation include Citigroup, JP Morgan, Deutsche Bank, HSBC and Royal Bank of Scotland.

Barclays’ misconduct relates to the daily setting of the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR).

These are two of the most important interest rates in the global financial markets and directly influence the value of trillions of dollars of financial deals between banks and other institutions.

They can also affect lending rates to the public, for instance with some mortgage deals.

It is not yet clear whether Barclays staff actually succeeded in manipulating the interest rates to the bank’s advantage and therefore whether it had any impact on borrowers.

While the FSA said only that the Barclays employees had attempted to do so, the US Department of Justice said that on some occasions they did affect the LIBOR and EURIBOR rates.

The fine imposed on Barclays is part of an international investigation into the setting of interbank rates between 2005 and 2009.

Each day the British Bankers’ Association (BBA) and the European Banking Association publish the LIBOR and EURIBOR rates by taking an average of the estimated rates submitted to them by leading banks.

Between 2005 and 2008, the Barclays staff who submitted estimates of their own interbank lending rates were frequently lobbied by its derivatives traders to put in figures which would benefit their trading positions, in order to produce a profit for the bank.

And between 2007 and 2009, during the height of the banking crisis, the staff put in artificially low figures, to avoid the suspicion that Barclays was under financial stress and thus having to borrow at noticeably higher rates than its competitors.

The FSA pointed out that Barclays traders were quite open about their routine attempts to lobby their colleagues who submitted the bank’s estimate of its borrowing costs to the BBA.

It was particularly concerned because it appeared to be “accepted culture” among some staff.

“Requests to Barclays’ submitters were made verbally and a large amount of email and instant message evidence consisting of derivatives traders’ requests also exists,” the FSA said.

In one instance, a trader recounted a conversation in which he had “begged” the submitter to put in a lower LIBOR figure.

“I’m like, dude, you’re killing us,” he said.

His manager replied: “Just tell him to… put it low.”

In turn, the staff submitting the data would respond to the traders’ requests.

“For you…anything,” said one.

“Done… for you big boy,” said another.

And: “I owe you big time… I’m opening a bottle of Bollinger.”