[ by Melanie Gretchen ]

Libor manipulation detection lost out to concerns of the financial crisis, according to a regulator review released on Tuesday.  Unfortunately for a number of banks, Libor is getting the last laugh as American, British and other international regulators level multimillion-dollar fines and continue their investigation in the wake of the scandal.

The British regulator, the Financial Services Authority (FSA), published an internal review, in which it said British authorities failed to detect interest-rate manipulation by big banks because regulators were occupied with containing the financial crisis.  Specifically, the FSA admitted to having failed to respond quickly to allegations of so-called lowballing, whereby managers altered submissions to Libor to portray their firms in a healthier position.

The FSA began its audit in the face of claims by politicians and the British bank Barclays that regulators had failed to act upon several possibilities of rate-rigging.  Since then, both the rate-setting process and the FSA, which will split into 2 separate units, are set for restructuring.

For further details, go to [Dealbook, 3/5/13].