Rate-fixing bankers to face jail under new EU rules
10.10.12 @ 09:36
BRUSSELS - Bankers caught manipulating the Libor exchange rate could face a minimum five-year jail term under new EU legislation.
The provisions included in the proposed market abuse law were adopted by 39 votes to 0 with a single abstention in a vote by the parliament's economic and monetary affairs committee on Monday (9 October).
Arlene McCarthy, the centre-left MEP piloting the bill through parliament, described the move as "a key step along the road to reforming the financial sector."
MEPs will now seek a swift deal with EU government ministers by Christmas, with a view to implementing the legislation in 2013.
For her part, McCarthy said: "The Libor scandal has demonstrated that the culture in the financial sector has not changed and that they cannot be trusted to self-regulate."
Sven Giegold, the finance spokesman for the Green group, said that the sanctions would act as "compelling deterrents against these unethical financial practices."
However, member states are thought to be uneasy about setting minimum jail terms at EU level.
The inclusion of criminal sanctions for interest rate fixing and manipulating other financial benchmarks had been announced by internal market commissioner Michel Barnier in July.
But the European Ccommission had steered clear of setting sanction levels, with justice commissioner Viviane Reding claiming that the EU treaties only allow European law-makers to agree on definitions of criminal conduct rather than sanctions themselves.
The move was provoked by the Libor rate-fixing scandal which made headlines over the summer, with a string of major banks in the US and the EU implicated in keeping the rate artificially high.
Libor, the interest rate at which banks lend to each other, determines the price of an estimated $800 trillion worth of financial instruments.
So far, regulators in Europe and the US are determining financial sanctions to be imposed on the banks involved.
The scandal also saw the resignation of Barclay's boss Bob Diamond after the British banking giant was fined £280 million for its involvement.
Prior to the MEPs' vote, an opinion poll by YouGov on behalf of campaign group Avaaz revealed that 89 percent of Europeans wanted to see financiers who commit fraud or manipulate markets face criminal sanctions.
The poll sampled 3,700 people in Germany, France and the UK. Avaaz also presented MEPs with a petition demanding sanctions signed by 720,000 Europeans.
The survey indicated public perception that governments enjoyed a cosy relationship with big banks.
Two thirds of Britons and Germans claimed that governments mainly listened to the banking giants when drawing up financial regulation.
The poll also revealed divided public opinion as to whether criminal sanctions should be established at national or EU level.
Only 41 percent of Britons agreed that common legal rules for criminal sanctions should be established at EU level, with 48 percent saying that the issue should be left to individual countries. Meanwhile, a majority of French and German respondents backed EU-level rules.