British police arrested three people Tuesday as part of their investigation into the manipulation of a key benchmark interest rate — the first British arrests in a scandal that's had global ramifications.
The three men — aged 33, 41 and 47 — were not named by officials. Search warrants were executed at the homes of all three, who are British nationals working in the United Kingdom.
The arrests follow an investigation from Britain's Serious Fraud Office. It opened its probe in July after Barclays was fined $435 million by American and British agencies for creating false reports on its borrowing costs between 2005 and 2009, specifically related to the London interbank offered rate, or LIBOR.
LIBOR is the rate banks use to borrow from each other — and it is critical. The rate indirectly affects the cost of loans that people pay when they take out loans — such as when consumers buy a home or car.
News that Barclays — and likely other banks — were manipulating a rate that underpins so many financial transactions prompted outrage among British lawmakers. Parliament's Treasury committee demanded sweeping changes to oversight of the banking industry and called for a tightening of laws to make it easier to prosecute rate-fixing offenses.
Numerous other banks are reportedly under investigation for similar violations.
The Financial Times has reported that at least 16 banks including three based in Britain are under investigation by U.S. authorities.
But Barclays has been the most bank most closely associated to the scandal, partly because of its cooperation with authorities. The scandal that followed forced Bob Diamond to resign as Barclay's chief executive.
Barclays is among several banks which submit daily data on the rates they are paying to borrow — data that is used to calculate LIBOR. The British Bankers' Association, a trade group, sets the LIBOR daily after about a dozen international banks submit borrowing estimates. Regulators allege some banks purposefully submitted fake numbers to have the LIBOR set at a rate that was more favorable to them.