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Libor scandal: Crédit Agricole and Société Générale in the crosshairs

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Libor scandal: Crédit Agricole and Société Générale in the crosshairs

Tour Société Générale in the district of La Défense.

REUTERS / Benoit Tessier

The titles of the banks Societe Generale and Credit Agricole were down Thursday morning on the Paris market, penalized by their possible involvement in the Libor scandal. At 9:20, the Société Générale lost 2% to 17.05 euros and Credit Agricole let go of 1.27% to 3.34 euros in a market up 0.38%.

According to the Financial Times dated July 19, bank regulators investigating the scandal are looking at the links between traders of the British bank Barclays, the origin of the scandal, and those of four other European banks, including two French. This would be employees of French banks Societe Generale and Credit Agricole, the German Deutsche Bank and Britain's HSBC, according to the website of the British newspaper citing people familiar with the matter, and states that these people longer work for the banks in question.

>> If you do not know what the Libor scandal, read:

Why Liborgate's a bomb in the banking sector

According to the FT, regulators are investigating the links that could have been weaving a Barclays traders involved in the scandal with counterparts of these banks. According to information from the German weekly Der Spiegel reported Sunday, Deutsche Bank has proposed to the European and Swiss authorities to cooperate fully with investigators, in order to avoid too heavy sentence, enjoying a status of "repentant witness" .

Libor interbank rate is now the subject of a major scandal in the UK, following the discovery of manipulations by the British bank Barclays between 2005 and 2009. Barclays revelations led to the resignation of the President and Director General of the institution will have to pay around € 360 million to end investigations of British and American regulators.

The British House of Commons will be a parliamentary commission of inquiry on the subject and the British Office of fight against financial crime (SFO) is about to open a criminal investigation. The European Commission has launched an investigation into all major interbank market rate. Concerning the possible involvement of French banks, the Governor of the Bank of France Christian Noyer said on Wednesday that "they were questioned by the authorities and answers, apparently, was satisfactory because at this point it does there is no more ". "For now, no one has said, has suggested that they were involved," he insisted.

A scandal over the world of finance

US Secretary of the Treasury, Timothy Geithner said Wednesday that the United States will mobilize for a "strong and credible" reform of Libor. The Libor scandal is added to the list of errors of global finance. According to the CEO of US bank Goldman Sachs, Lloyd Blankfein, the main negative effect that can highlight "of the matter is that this could" undermine confidence in the integrity of the financial system as it has already been rolled. "The chairman of the US Federal Reserve (Fed) Chairman Ben Bernanke on Tuesday that he believed the actions revealed until" are not only of great concern in themselves but also have the effect of undermining the markets. "

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An analysis shared by the IMF believes that "the most serious consequence of this scandal (...) lies in the fact that it undermines the certainty and confidence that the markets in the benchmark," according to José Vinals, Director of the International Capital Markets Department of the IMF, at a press conference Monday in Washington.

Libor is an interbank rate at which a bank lends or borrows money to another for finance short-term. This is an unregulated market, said OTC, on which banks are present daily to balance their books. The flow of liquidity in this market is essential to the proper functioning of the banking and financial system and such rates (Libor and other interbank rate, Euribor) have an impact on the entire financial sector, especially the financial products derivatives brew huge sums. They also serve as indirect reference to loans to households and businesses.

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