In the recent LIBOR scandal, serious concerns have been raised about false submissions of banks' estimated interbank lending rates. Any actual or attempted manipulation of such key benchmarks can have a serious impact on market integrity, and could result in significant losses to consumers and investors, or distort the real economy.
The European Commission has today acted to address this kind of market manipulation, by adopting amendments to the proposals for a Regulation and a Directive on insider dealing and market manipulation, including criminal sanctions, initially tabled on 20 October 2011. Today's amendments will clearly prohibit the manipulation of benchmarks, including LIBOR and EURIBOR, and make such manipulation a criminal offence.
Vice-President Viviane Reding, the EU's Justice Commissioner said: "Public confidence has taken a nosedive with the latest scandals about serious manipulations of lending rates by banks. EU action is needed to put an end to criminal activity in the banking sector and criminal law can serve as a strong deterrent. This is why we are today proposing EU-wide rules to tackle this type of market abuse and close any regulatory loopholes. A swift agreement on these proposals will help restore much needed confidence of the public and investors in this crucial sector of the economy."
Internal Market and Services Commissioner Michel Barnier said: "The international investigations underway into the manipulation of LIBOR have revealed yet another example of scandalous behaviour by the banks. I wanted to make sure that our legislative proposals on market abuse fully prohibit such outrages. That is why I have discussed this with the European Parliament and acted quickly to amend our proposals, to ensure that manipulation of benchmarks is clearly illegal and is subject to criminal sanctions in all countries."
He added that for the past few weeks, the LIBOR case has been clearly revealing manipulation of inter-bank lending rates. Behind this manipulation, there was a total lack of any moral values, a scandalous behaviour from a number of financial actors to the detriment of citizens, companies and public authorities. The European Commission feels that such behaviour should be sanctioned without any excuse. That is why the supervisors in all EU Member States should be able to identify, diagnose and analyse these manipulations. At the sale time, judges must be capable to have all means to punish them without complaisance even in the most serious cases, including prison sentences.
He guaranteed that the European Commission is going to check all of these indexes, including EURIBOR and others, and will be seeing how to provide a seat of rules for something which is now self-regulated, and some type of public sectors' surveillance. The Commission wants to provide guarantees to consumers and investors.
Labour MEP Edward Scicluna explains further the consequences of the LIBOR scandal in this video interview: