It has been called the largest financial scandal in history, a web of alleged white-collar malfeasance spanning several continents while hitting portfolios and pocketbooks from Wall Street to Main Street. But US prosecutors may be hesitant to launch criminal proceedings against large financial institutions for alleged manipulation of the Libor, a key interbank borrowing rate that affects an estimated $360 trillion in financial contracts worldwide, economists and securities experts say. Ever since the crash of Lehman Brothers four years ago prompted the U.S. government to rescue the country’s largest financial institutions with taxpayer money, U.S. authorities are hesitant to “do something that might make one of these banks fail,” said Stephen Bainbridge, a securities regulation expert at UCLA Law School. All eyes in the financial world on Friday will be trained on London, where Martin Wheatley, Britain’s top financial regulator, is set to issue recommendations for regulatory reforms to prevent manipulation of the Libor, which is used by lenders to set interest rates for all manner of investments, from municipal bonds to mortgages to credit cards. “Anybody who has any investment in financial markets has been affected by the Libor fraud,” Bainbridge said. “Over half of the American population own stocks—whether directly or through a mutual fund—so it has affected most people.” The London Interbank Offered Rate, or Libor, is the average interest rate at which top banks estimate they would borrow money from other banks. This rate, which is adjusted daily, is used as the benchmark used to set interest rates for a wide range of financial products and commercial markets across the globe. Wheatley’s announcement comes after months of allegations, resignations, and lurid evidence pointing at possible collusion among the banks to manipulate the rate in order benefit their trading arms. British bank Barclays in June admitted that its traders had encouraged the bank to rig the rate in order to benefit their financial positions, paying a $470 million fine to U.S. and British authorities to settle the charges. Wheatley’s report Friday is unlikely to include scores of smoking guns pointing to such collusion, but if it does contain instances of “trader-to-trader contact in which one is asking the other to help him push Libor up or down, that would be of great interest to U.S. criminal authorities,” said John Coffee, a prominent securities law expert at Columbia Law School. The 18 banks that set the Libor for the U.S. dollar include financial behemoths such as Bank of America, Citibank, JP Morgan Chase, and Deutsche Bank. Should evidence of collusion to rig rates at these institutions emerge, the U.S. Justice Department may target individual executives for criminal prosecution rather than go after the financial entity itself, said Robert Shapiro, a former undersecretary of commerce for economic affairs under the administration of U.S. President Bill Clinton. “So far the Justice Department has not been willing to put any of the large financial institutions in that particular box,” Shapiro said. “I’d be surprised.” Opting to forgo criminal prosecution if there is clear evidence of wrongdoing risks sending a “wrong signal that if an institution is large enough, and important enough, it’s not going to be criminally charged,” said Rosa M. Abrantes-Metz, a financial regulation expert with Global Economics Group in New York City and an adjunct associate professor at New York University’s Leonard N. Stern School of Business. But “criminally charging institutions, particularly in the financial sector—given the instability there—can be very complicated,” she said. Even in the absence of criminal charges, the largest U.S. financial players face a possible avalanche of civil litigation over the Libor-rigging accusations. In July, New York-based Berkshire Bank filed a complaint in federal court against more than a dozen banks in connection with the allegations, citing the “tens, if not hundreds, of billions of dollars of loans” that “are originated or sold within this state each year with rates tied to Libor.” Dozens of other suits have been filed in the United States in connection with the alleged rate-fixing. Plaintiffs in these cases, however, will have to do the math on whether the eventual payoff is worth the effort. The banks involved in setting Libor “have enormous resources to fight these suits,” Shapiro said.