Banks - Don't you just love-em???

[CliveH]

More Techy that most this one - but worth a read if you need your blood pressure raised.

 

Ref:- LIBOR = London InterBank Offered Rate - and is the charge banks make to other banks when getting the money out there working (Ha Ha Ha!!!!!!!!!!!!)

 

 

 

Barclays fined record £290m over LIBOR failings

27 Jun 2012 | 13:40

Nick Paler - Investment Week

Categories: Economics / Markets

Topics: Fsa | Barclays

Barclays has been slapped with the largest-ever fine by the FSA and a huge penalty by the US authorities after it breached rules regarding LIBOR.

 

 

The FSA fined the bank £59.5m for significant failings in relation to LIBOR and EURIBOR, after it sought to profit from the settlement process.

 

 

The FSA said Barclays made submissions which formed part of the LIBOR and EURIBOR setting process that took into account requests from Barclays' interest rate derivatives traders. These traders were motivated by profit and sought to benefit Barclays' trading positions.

 

It also sought to influence the EURIBOR submissions of other banks contributing to the rate setting process.

 

Barclays qualified for a 30% discount under the FSA's settlement discount scheme, after working with the FSA. Without the discount the fine would have been £85 million.

 

In addition Barclays has agreed to pay a fine of $360m (£231m) to US authorities for the same offences.

 

The US Commodity Futures Trading Commission brought attempted manipulation and false reporting charges against Barclays for similar failings, which the bank agreed to settle, with the CFTC imposing a penalty of US$200 million ($128m).

 

In addition, as part of an agreement with the US Department of Justice, Barclays admitted to its misconduct and agreed to pay a penalty of US$160 million (£103m).

 

Barclays said chief executive Bob Diamond and other senior executives would forego their annual bonuses for 2012 as a result of the fines.

 

"To reflect our collective responsibility as leaders, Chris Lucas, Jerry del Missier, Rich Ricci and I have voluntarily agreed with the Board to forgo any consideration for an annual bonus this year," Diamond said in a statement.

 

 

 

 

 

[Guest pelmetman]

Looks like its not just Barclay's *-)................

[CliveH]

Sorry if this is of not much interest to many - but this latest bit is amazing - They have released some of the emails documenting what went on!

 

...............................................

 

The FSA has released a host of communications revealing attempts to influence Barclays' LIBOR submissions, after earlier fining the bank £59.5m for LIBOR and EURIBOR manipulation.

 

The fine is the largest in the FSA's history, and came alongside £230m worth of penalties from US regulators.

 

LIBOR - the London Interbank Offered Rate - is compiled by the British Bankers' Association as a daily average of individual banks' stated lending rates to other financial institutions.

 

The rates for one-month, three-month, six-month and one-year loans are then used as a benchmark for bank rates and financial instrument pricing across the world.

 

Contained within the FSA's Final Notice to Barclays, a section entitled ‘inappropriate US dollar LIBOR and EURIBOR submissions made following requests from derivatives traders' reveals numerous requests made to submitters.

 

The FSA has identified that at least 173 requests for US dollar LIBOR submissions were made to Barclays' submitters between January 2005 and May 2009, including 11 requests based on communications with external traders.

 

At least 58 requests for EURIBOR submissions were made to the submitters between September 2005 and May 2009, with at least 26 requests for yen LIBOR submissions made between August 2006 and June 2009.

 

Below are some of the requests the FSA has made public.

 

On Friday, 10 March 2006, two US dollar derivatives traders made email requests for a low three month US dollar LIBOR submission for the coming Monday:

 

Trader C stated "We have an unbelievably large set on Monday [...] We need a really low 3m fix, it could potentially cost a fortune. Would really appreciate any help".

 

On Monday, 13 March 2006, the following email exchange took place:

 

Trader C: "The big day [has] arrived... My NYK are screaming at me about an unchanged 3m LIBOR. As always, any help wd be greatly appreciated. What do you think you'll go for 3m?"

 

Submitter: "I am going 90 altho 91 is what I should be posting".

 

Trader C: "[...] when I retire and write a book about this business your name will be written in golden letters [...]".

 

Submitter: "I would prefer this [to] not be in any book!"

 

On Friday 7 April 2006, Trader C requested low one month and three month US dollar LIBOR submissions (shortly before the submissions were due to be made):

 

"If it's not too late low 1m and 3m would be nice, but please feel free to say "no"... Coffees will be coming your way either way, just to say thank you for your help in the past few weeks".

 

A submitter responded "Done...for you big boy".

 

On Thursday 14 December 2006, Trader F emailed a submitter, requesting a low three month US dollar LIBOR submission for the following Monday, 18 December 2006:

 

"For Monday we are very long 3m cash here in NY and would like the setting to be set as low as possible...thanks".

 

The submitter instructed another submitter to accommodate the request; "You heard the man" and confirmed to Trader F "[X] will take notice of what you say about a low 3 month".

 

External traders also attempted to get Barclays to submit lower LIBOR rates:

 

On Thursday 26 October 2006, an external trader made a request for a lower three month US dollar LIBOR submission.

 

The external trader stated in an email to Trader G at Barclays "If it comes in unchanged I'm a dead man". Trader G responded that he would "have a chat".

 

Barclays' submission on that day for three month US dollar LIBOR was half a basis point lower than the day before, rather than being unchanged.

 

The external trader thanked Trader G for Barclays' LIBOR submission later that day: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger".

 

The FSA said that as of September 2007 onwards, Barclays determined its LIBOR submissions whilst taking senior management's concerns about negative media comment into account.

 

The Final Notice said that in early 2008, the BBA contacted Barclays to note concerns had been raised about the accuracy of some banks' LIBOR submissions, with fears some were being adjusted because of concerns about attracting negative media attention.

 

But when liquidity conditions deteriorated in the aftermath of the collapse of Lehman Brothers, Barclays "again factored senior management's concerns about negative media attention into its LIBOR submissions process," according to the Final Notice.

 

On Wednesday 8 October 2008, for example, with markets still panicked by Lehman, a submitter was asked about Barclays' LIBOR submissions during a telephone conversation.

 

He responded that "[Manager E]'s asked me to put it lower than it was yesterday ... to send the message that we're not in the s***".

 

Barclays' submission the day before had been 5.05, which was 25 basis points higher than the next highest contributor. Barclays' submission on 8 October 2008 was still the highest submission, but equal with one other contributor.

 

[teflon2]

SPIVS IN SUITS !!! *-)

[Guest pelmetman]

I wonder if we'll get a refund of the extra interest we paid on our mortgages and loans *-)

[flicka]

It will be interesting if the shareholders call for an EGM.

 

They have been taking the P**S out of their customers for a long time, but still think giving up their bonuses will save their rhino hides.

 

Time for shareholders revenge - up the revolution >:-)

[nowtelse2do]

Clive, Think it might be a daft question, but what they have done, is it a crime and if so should Bob Diamond and whoever else be held accountable in court?

 

Dave

[colin]

I suspect the actual traders have still got the bonus and this is just taking the piss out of shareholders as per usual, this type of thing will only be changed when the individuals involved lose their bonus and go to jail, some hope.

[Syd]

 

We have got about £280 in Barclays and we cannot get it out because Barclays have lost the signatories forms and so we are no longer signatories on our own bank account.

 

Ombudsman not much help either, still I suppose they need it more than we do >:-(

[Guest pelmetman]

Apparently the traders involved have been disciplined..................I thought rigging the markets was a criminal offence?...............As usual its the same old one rule for them, and a different one for the rest of us *-)........

[CliveH]

nowtelse2do - 2012-06-27 9:38 PM

 

Clive, Think it might be a daft question, but what they have done, is it a crime and if so should Bob Diamond and whoever else be held accountable in court?

 

Dave

 

Just exchanging some emails with colleagues and we are generally discussing exactly this point. So not a daft question at all.

 

All are pretty apoplectic re what went on. As regards the "Law" - most certainly the rules were broken as laid down by the Regulators (FSA in the UK) - But it seems that whilst some have been fired the Banks themselves will simply weather the storm and carry on.

 

The issue being that the "Law" does not usually back up in statute the rules that the FSA lay down. The Law states that the FSA regulates the UK Financial Services and effectively gives the FSA the status of being Judge Jury and Executioner.

 

So we may have the situation where the banks broke the rules as set out by the FSA, and the Law gives the FSA power in these matters, but the Law itself may simply have nothing to say regarding how banks work together to set the LIBOR.

 

It could be that all we see is huge fines, a few sackings and then back to business as usual.

 

It REALLY is not good enough given the recent past history of the Banks and how they have been consistently shown to be incapable of following the rules. Especially when the FSA dictate barmy rules to other sectors – rules that you can track a clear audit trail back to those Banking individuals seconded to the FSA via Gordon Brown.

 

Because - interestingly - look at the time line when this was happening - it all happened when the FSA was effectively controlled by the Banks when Gordon Brown realised his "monster" was as useful as a chocolate teapot and so asked the banks for help in running his "super regulator".

 

So the Banks were invited to perform a Coup and this is just one more example of the "piss take" mentality the Banks had/have.

 

Fair play to the Coalition on this point in that they are dismantling the FSA but in the interim have given the FSA the teeth to look at what actually went on.

 

I suspect the FSA will want to keep the Banks as is. But as others have said – Shareholder Power is beginning to have teeth as well.

 

A legal bod has indicated that if individuals can make a case that this manipulation of LIBOR adversely affected their mortgage interest rate or Savings rate then there could be legal action – most likely via a “Class Action” where hundreds if not ‘000’s sign up but only a few cases go to court and if successful then all the listed cases win their case.

 

Early days yet tho.

 

[CliveH]

 

BBC TV News just announced that the fines equate to just 10 days profit for the Barclays group.

 

In the US - the authorities seem to be taking it far more seriously in that they are saying senior managers within Barclays carried out criminal activities.

 

In the UK - looks like the case is being investigated as fraud. Which is what it is.

 

[Brian Kirby]

I shall get screamed at for this, of course, but does no-one see the remotest similarity between this by Barclays and others, and Jimmy Carr and others indulging in highly contrived tax avoidance schemes?

 

I do not condone or excuse either, and I appreciate that on the one hand the schemes are borderline legal and are adopted by individuals, whereas Barclays is a large financial institution with many self employed traders working within it, and has clearly broken regulatory constraints (though apparently not necessarily the law).

 

However, both appear to be the consequence of pushing at the boundaries of what is legal/permissible, for personal benefit, with no regard to wider responsibilities. I can't quite see, therefore, why the one should apparently be ground for righteous anger, and the other not. Morally, are not both equal?

[Syd]

It would seem to me that Barclays fit into the following quiet well on more than one point

 

 

Additional public interest factors in favour of prosecution:

 

(a) A history of similar conduct (including prior criminal, civil and regulatory enforcement actions against it); failing to prosecute in circumstances where there have been repeated and flagrant breaches of the law may not be a proportionate response and may not provide adequate deterrent effects;

 

(b) The conduct alleged is part of the established business practices of the company;

 

© The offence was committed at a time when the company had an ineffective corporate compliance programme;

 

(d) The company had been previously subject to warning, sanctions or criminal charges and had nonetheless failed to take adequate action to prevent future unlawful conduct, or had continued to engage in the conduct;

 

(e) Failure to report wrongdoing within reasonable time of the offending coming to light; (the prosecutor will also need to consider whether it is appropriate to charge the company officers responsible for the failures/ breaches);

 

(f) Failure to report properly and fully the true extent of the wrongdoing.

 

[CliveH]

Brian Kirby - 2012-06-28 11:37 AM

 

I shall get screamed at for this, of course, but does no-one see the remotest similarity between this by Barclays and others, and Jimmy Carr and others indulging in highly contrived tax avoidance schemes?

 

I do not condone or excuse either, and I appreciate that on the one hand the schemes are borderline legal and are adopted by individuals, whereas Barclays is a large financial institution with many self employed traders working within it, and has clearly broken regulatory constraints (though apparently not necessarily the law).

 

However, both appear to be the consequence of pushing at the boundaries of what is legal/permissible, for personal benefit, with no regard to wider responsibilities. I can't quite see, therefore, why the one should apparently be ground for righteous anger, and the other not. Morally, are not both equal?

 

Hardly Brian

 

What Barclays did was break the rules - the US sees what they did as potentially criminal activity.

 

What Carr did was PERFECTLY LEGAL!!! - His only "crime" in my book was that he slated others openly in his shows whilst all the time doing exactly the same!!

 

It is not illegal to set up a trust, it is not illegal to have monies paid into that trust and it is not illegal to have that trust lend you money.

 

However what the Banks have done is to manipulate a rate that had knock on effects in all sorts of markets. That is "illegal" under FSA rules (even if the "Law" in the UK hands over the specifics to the FSA) and it certainly seems to be illegal under US law.

 

Please remember that half the world see us as being moral criminals simply because we actually set interest rates!! Charging interest is a moral abomination to half the world.

 

The fact that the LIBOR rate has been manipulated probably gives rise to all sorts of comments from those who claim moral superiority.

 

So best not to confuse what is Moral and what is Legal. The banks have shown themselves time and time again to be incapable of either.

 

 

 

[CliveH]

Syd - 2012-06-28 11:44 AM

 

It would seem to me that Barclays fit into the following quiet well on more than one point

 

 

Additional public interest factors in favour of prosecution:

 

(a) A history of similar conduct (including prior criminal, civil and regulatory enforcement actions against it); failing to prosecute in circumstances where there have been repeated and flagrant breaches of the law may not be a proportionate response and may not provide adequate deterrent effects;

 

(b) The conduct alleged is part of the established business practices of the company;

 

© The offence was committed at a time when the company had an ineffective corporate compliance programme;

 

(d) The company had been previously subject to warning, sanctions or criminal charges and had nonetheless failed to take adequate action to prevent future unlawful conduct, or had continued to engage in the conduct;

 

(e) Failure to report wrongdoing within reasonable time of the offending coming to light; (the prosecutor will also need to consider whether it is appropriate to charge the company officers responsible for the failures/ breaches);

 

(f) Failure to report properly and fully the true extent of the wrongdoing.

 

Agreed totally.

 

Only point I would add is that with point c) there really does need to be an investigation into exactly how it was that the Banks managed to "take over" the FSA such that "Compliance monitoring" with the rules was so lax during this time when it all hit the fan. The "oversight" of the FSA was virtually non-existent it seems.

 

Remember that not only were these rules being broken but we had the FSA asleep at the wheel re Northern Rock, and Icelandic banks about the same time.

 

 

[Brian Kirby]

CliveH - 2012-06-28 1:24 PM..................So best not to confuse what is Moral and what is Legal. The banks have shown themselves time and time again to be incapable of either.

You will not be surprised that I disagree. I don't need an Imam to tell me what is moral, and I don't need a law to tell me either. I have no problem with interest: Muslims do. They indulge in similarly obscure wheezes to get around this religious objection, so they can examine their own moral stand! I don't see any confusion, I'm saying that morally, they are as bad as each other, irrespective of any legal or religious arguments.

 

Agreed, good post by Syd.

[CliveH]

Brian - the "Interest" concept was to demonstrate concept - nothing more. The point is that ne action was legal - the other not.

 

Interesting developments:-

 

"Osborne piles the pressure on Barclays

 

12.39: Bob Diamond, the CEO of Barclays, has some serious questions to answer today, chancellor George Osborne just said: ‘what did he know and when did he know it?’

 

Speaking to parliament as Barclays shares dropped over 11%, Osborne said that he expects the number of individuals under formal investigation in the Libor probe to increase and that he needs to find out who in Barclays management was involved in the probe.

 

He bemoaned the FSA’s inability to take criminal action but said he would examine any gaps in criminal laws.

 

Osborne described the email exchanges between Barclays traders outlined in yesterday’s FSA notice as reading like ‘an epitaph from an age of irresponsibility’."

 

......................................

 

The penultimate para confirms my concern that here in the UK, the FSA is the "Law" on such matters and therefore it is unlikely that criminal action will result here. This is due entirely to the total idiocy used by Gordon Brown when he set up the FSA as his "super regulator". I am surprised that idiot can regulate his own anus given the mess his ego has got us all into.

 

Looks like the same is NOT true re criminal prosecutions in the US tho'.

 

I suspect some in the Banks are now looking for countries without extradition treaties with the US (lol) because we Brits can get sent there for trial without even having a court hearing here in the UK!!

 

 

 

[Guest pelmetman]

At least I now know what Libor means :D

 

 

 

 

Lying b*******d's rate (lol) (lol) (lol) (lol)

[Guest pelmetman]

It'll be interesting to see what Dodgy Diamond has to say at the Parliamentary committee, seeing as he was in charge of that section of the bank when all the dodgy dealing was going on ;-)

 

Although I expect it'll turn out to be another Leveson style pantomime.........Er.... I can't remember.......Er..... I forget *-)

 

Either way he'll go down in history as a highly paid fool....... or crook........ :D

[Brian Kirby]

The really interesting thing, if we ever get to find out, will be if this was "top down" crookery, or "bottom up" crookery. It will be easier to believe Diamond had no knowledge, if it was a scam invented by a small number of traders to cover their backsides when they wanted to recover bad trades. Don't tell the boss, etc. However, the e-mails tend to suggest otherwise.

 

The further up the management chain the knowledge spread, the more difficulty he will have in convincing others that he was kept in the dark. Management chains have few levels these days, and he must have been aware of the allegations being made at the time that someone was cooking the rates, so one would have expected him to start asking questions - unless, of course, he already knew the answers, but wished to keep that little gem to himself!

 

Idle speculation, of course, but if he'd had a quiet word about it with the then CE, I wonder if he'd have got his promotion? Services rendered?

[nowtelse2do]

Thanks for the reply Clive.

 

It looks like some influential people are already asking the question about criminal proceedings. Whether that is against individuals or against the the company itself is unclear but there is talk now of mortgage miss selling. Some interesting month's ahead. Don't know where Bob Diamond would be able to hide from extradition to the US, he is after all an American.

 

Dave

[Guest pelmetman]

Listening to radio 4 this morning and it appears the banking industry in general and the FT had been saying something was fishy with the Libor rates for years 8-).................So one would expect "Dodgy Diamond" to have heard the rumors as well *-)......

[Syd]

 

Just a personal observation with no hard evidence to back it up 8-)

 

This is what I would call the "American influence" our banks being dragged down to the American gutter level, by the resident Americans in situ, rather willingly though.

[flicka]

The Traders acted in a manner for self benefit via bonuses earned & in a similar vein as Nick Gleeson (remember him ?)

IMO - Nothing less than "Insider Trading" which is a criminal offence.

 

All those traders participating in the scamming, should suffer the same fate (as the above individual) but also be made to repay any bonuses earned during the period of the FRAUD.