Certificates of Deposit (CD) is used as a benchmark to set lending rates. A CD is a way of saving with a fixed interest rate and maturity sold by banks and circulated in the secondary market by brokerages.
“If the investigation finds collusion, there will be significant fines. Even if there was no collusion, it’s highly likely that the government’s motive behind the investigation is to lower household lending rates by inducing a fall in CD rates,” said Taurus Investment analyst Andy Lee said in a research report.
This follows the Libor-rigging scandal by Barclays bank and possibly a few other banks in the U.S. and Europe, HSBC lax control resulting in money laundering, and surprise losses at JP Morgan which have triggered a US federal inquiry.