This cuts both ways. During the last few years, any outsized profits from rate manipulation may have lessened pressure on the banks to raise customer fees. Now, however, the bill for wrongdoing is coming due. On June 27, 2012, London's Barclay's bank was the first bank to confess to misconduct. Between 2005 and 2009, the bank manipulated Libor submissions to give a healthier picture of the bank's credit quality and its ability to raise funds. It reached an agreement with British and American regulators to pay a $450 million fine, and three top officials of the bank resigned. Adding to the outrage is the discovery that regulators in Britain and the United States may have known that Libor was being rigged as far back as the fall of 2007 but took limited action.
Libor investigations could cost banks billions of dollars in penalties. Sixteen banks are under investigation for manipulating the Libor or other rate indexes to get extra profits and limit losses on their trading positions. Such losses would dent profits, causing big banks to look elsewhere for revenue. This could affect fees and rates that banks charge their customers.
