SWITZERLAND said yesterday it was investigating a dozen US, European and Japanese banks suspected of conspiring to manipulate interbank lending rates used to set interest rates on hundreds of trillions of dollars of securities.!

The Swiss Competition Commission (COMCO) said it had received information of possible collusion between derivative traders concerning the London Interbank Offered Rate (Libor) and the Tokyo Interbank Offered Rate (Tibor).!

"Derivative traders working for a number of financial institutions might have manipulated these submissions by coordinating their behaviour, thereby influencing these reference rates in their favour," COMCO said in a statement.!

Libor is derived from the rates that banks say they charge each other and is used worldwide as a benchmark for setting rates on about US$350 trillion of derivatives and other financial products. Small changes in the rate can have large impacts on the amounts of interest that can be charged.!

COMCO said those under investigation are Bank of Tokyo-Mitsubishi UFJ, Citigroup, Credit Suisse, Deutsche Bank, HSBC Holdings, JP Morgan Chase & Co, Mizuho Financial Group Inc., Rabobank Groep NV, Royal Bank of Scotland Plc Societe Generale, Sumitomo Mitsui Banking Corporation and UBS.!

US, European Union and British regulators are also investigating whether banks understated interbank rates to reduce borrowing costs and downplay investor panic during the banking crisis.!

"We are in contact with the US Department of Justice and the EU Competition Commission," said Olivier Schaller, a COMCO official.!

"At present we are focusing on the problems that appeared in the Swiss market. We are at the beginning of our investigation."

Reuters