Watchdog probes ICAP over Libor sending shares tumbling

Investors took fright yesterday as the world’s largest currency broker publicly confirmed it is being investigated by the City watchdog over suspicions it rigged interest rates.

Fears that ICAP may be more heavily involved in the scandal than previously thought sent shares down almost 3.1p to 324p.

So far the spotlight has been on some of Britain’s biggest lenders, including Royal Bank of Scotland, which is bracing itself for a huge fine in the coming weeks.

Libor effect: Fears that ICAP may be more heavily involved in the scandal than previously thought sent shares down almost 3.1p to 324p

But there are growing concerns over the role that middlemen – which help broker deals for investment banks – may have played a part in the conspiracy.

ICAP, founded by former Tory Party treasurer Michael Spencer, has become the first non-bank to confirm it has been linked to the scandal.

Its decision to go public followed a leaked internal memo from the City watchdog confirming it is investigating the broker.

Spencer previously played down the firm’s involvement in the scandal when it emerged last summer.
He said the investigations were not a ‘high concern’ as his company was not ‘front and forward’ in the investigation.

But the internal memo from the Financial Services Authority suggested to analysts and investors that Spencer’s confidence may be misguided.

The watchdog has assigned seven staff to focus on the currency broker.

It is reported to have roughly 50 staff working on the huge probe into Libor, suggesting that ICAP is high on its list of priorities.

The memo, dated from March last year, shows that the watchdog has been investigating a subsidiary of the group.

It suspects the unnamed subsidiary may have broken rules by ‘directly or indirectly inappropriately influencing or attempting to influence submissions used to compile the London Interbank Offered Rate (Libor)’.

Unlike investment banks ICAP does not help to set Libor interest rates – which are used as a benchmark for mortgages and trillions of pounds of investments.

But regulators are concerned that ICAP and rival brokers have colluded with traders at investment banks.

James Hamilton, an analyst at Numis, said: ‘News flow is bad enough without this and until a resolution is found it is hard to see the shares doing anything other than underperform.’

The FSA declined to comment. An ICAP spokesman said: ‘The investigation is confidential, accordingly no further comment will be made at this stage.’