Libor scandal: Seven banks Summoned in US probe

Barclays was fined for trying to manipulate the Libor rates

Seven banks, including HSBC and Royal Bank of Scotland, are to be questioned in the US for alleged manipulation of the Libor inter-bank lending rate.

The other banks receiving subpoenas by the New York attorney general are Barclays, Citigroup, Deutsche Bank, JPMorgan and UBS.

Last month, Barclays was fined £290m by UK and US regulators for rigging Libor. ( A slap on the wrist and a slice of the pie)

Some of the world's biggest banks have been embroiled in a number of scandals in recent months.

Following the Barclays fine, US regulators said they were investigating a number of other banks for potential Libor rigging.

A government-ordered review into Libor is currently being conducted by the managing director of the Financial Services Authority, Martin Wheatley.

The Wheatley review is examining how the Libor rate, the benchmark interest rate for trillions of financial contracts including some mortgages, is calculated and regulated.

The current Libor system is no longer a "viable option", Mr Wheatley said.

Libor is calculated using rates submitted by a group of leading banks who estimate how much it costs them to borrow in 10 currencies and 15 lengths of loans, ranging from overnight to 12 months.

There have been a series of allegations over the trading policies of banks in recent months.

On Tuesday, Standard Chartered agreed to pay $340m (£217m) to New York regulators to settle claims that it hid transactions worth $250bn with Iran. (Small fine for large transaction)

Standard Chartered shares rallied on Wednesday after it agreed to settle the claims, after the institution had been threatened with having its US banking licence revoked.

Last week, New York's DFS alleged that the US unit of the bank had illegally hidden 60,000 transactions with Iran worth $250bn over nearly a decade.

It accused the London-based bank of being a "rogue institution" for breaking US sanctions against Iran.

HSBC has also been accused of failing to prevent money laundering by the US Senate.

According to the Senate report, the US unit of HSBC carried out 28,000 undisclosed sensitive transactions between 2001 and 2007, an internal audit commissioned by the bank found. The vast majority of those transactions - worth $19.7bn - involved Iran.

As for Barclays, the Libor scandal led to the resignation of chief executive Bob Diamond as well as chairman Marcus Agius.

Last week, Sir David Walker was appointed as the new chairman.

He said he wants to review the way the bank operates and will begin his search for a new chief executive "within days".

Sir David is a senior banker who led the 2009 government inquiry into the rules governing how banks are run.

RBS has already admitted it is being investigated for fixing Libor.

It said: "RBS Group continues to receive requests from various regulators investigating the setting of libor and other interest rates.

"We are cooperating with the investigations and are keeping relevant regulators informed,( and paid off?)"