Regulators probing alleged manipulation of Libor rates, the benchmark for interbank borrowing costs, are focusing on five lenders, a person familiar with the matter said on Thursday.

Bank of America , Barclays , Citigroup , WestLB and UBS are being investigated by regulators in Britain, Japan and the United States, said the source, who asked not to be named.

Swiss bank UBS had said on Tuesday it received subpoenas from Japanese and U.S. regulators regarding whether it made improper attempts to manipulate the London interbank offered rate.

Thursday's Financial Times, citing people familiar with the investigation, reported Barclays, BofA, and Citi had all received subpoenas from U.S. regulators. Investigators had also demanded information from WestLB, although the German bank said it had not been subpoenaed, the paper said.

Regulators contacted by Reuters, as well as Barclays, BofA, Citi and WestLB, all declined to comment.

Some lawyers said the regulators, who are investigating the setting of dollar Libor prices in 2007 and 2008 -- just before and during the financial crisis -- faced a tough task.

Unless significant in terms of evidence, to prove such in such turbulent markets would be less than clear cut -- and like searching for the needle in a hay stack, said Tom O'Riordan, a partner at law firm Paul Hastings.

Libor rates spiked during the financial crisis but were widely criticized at the time for not reflecting true market prices. The system relies on banks providing honest prices and the price provided by each bank being transparent.

NERVY INVESTORS

During the financial crisis, lending effectively dried up as banks hoarded cash amid uncertainty about the health of a counterparty. Another problem was that banks were under intense scrutiny, so any sign they were paying high prices to refinance could have been seized upon by nervy investors.

The British Bankers' Association (BBA) sets Libor prices each day, providing a benchmark that reflects the interest rates being used by the world's major lenders.

The BBA said Libor has a straightforward and transparent calculation method which excludes any rates that are significant outliers. It declined to comment on the investigation.

Thomson Reuters compiles and publishes the data on behalf of the BBA. Reuters News is part of Thomson Reuters.

Libor is calculated by banks contributing the rate at which they expect to pay at 1100 GMT for loans with durations of one day to a year, in a number of currencies.

Sixteen banks contributed to the dollar rate in 2008. The lowest and highest four contributions are discarded and the remaining rates averaged.

In December 2008 the BBA said it would enhance governance and scrutiny procedures on the data and earlier this year four more banks were added to contribute to the dollar rate. (Additional reporting by William James and Kirstin Ridley in London, with Kathrin Jones in Frankfurt and Sakthi Prasad in Bangalore; Editing by Douwe Miedema and David Holmes)

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