EU wants criminal penalties for interest rate-rigging

The European Commission said on Wednesday it will ask all member states to introduce criminal penalties for rigging interest rates so as to help restore market confidence after the London Libor scandal.

It said such manipulation "can have a serious impact on market integrity and could result in significant losses to consumers and investors, or distort the real economy."

Accordingly, the commission was adopting amendments to prevent "the manipulation of (interest rate) benchmarks ... and make such manipulation a criminal offence."

Britain's Barclays bank was recently fined £290 million ($451 million, 371 million euros) after admitting that it attempted to manipulate the Libor and Euribor rates between 2005 and 2009.

The United States and the EU have probes into the scandal, threatening to draw in more banks and calling into question oversight in London, one of the world's top financial centres noted for its light regulatory system.

Libor (London Interbank Offered Rate) is a flagship London instrument used as an interest benchmark throughout the world, while Euribor is the eurozone equivalent.

The rates play a key role in global markets, affecting what banks, businesses and individuals pay to borrow money.

"Public confidence has taken a nosedive with the latest scandals," Viviane Reding, the EU's Justice Commissioner said in the statement.

"EU action is needed to put an end to criminal activity in the banking sector and criminal law can serve as a strong deterrent. This is why we are today proposing EU-wide rules to tackle this type of market abuse and close any regulatory loopholes.

"A swift agreement on these proposals will help restore much needed confidence of the public and investors in this crucial sector of the economy."