Barclays fined £290 million

[Sheilbh]

Barclays chief Bob Diamond gives up 2012 bonus over £290m fine
Top executives forgo bonuses after bank fined £290m for 'serious, widespread' role in manipulating crucial interest rates

Barclays has been slapped with total fines of £290m for its "serious, widespread" role in manipulating the price of crucial interest rates in a move that has forced chief executive Bob Diamond and other top executives to forgo any bonuses for 2012.

The £59.5m fine from the Financial Services Authority is the largest penalty ever levied by the City regulator, which found that Barclays contravened its rules for a number of years and involved "a significant number of employees".

The other penalties paid by Barclays are to settle with the US authorities, the department of justice ($200m) and the Commodities Futures Trading Commission ($160m), as part of an industry wide probe into the way that interest rates traded between banks were set.

The investigation covered the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor) both of which play a critical role in setting the rates of interest that households and major companies pay to borrow.

Libor is used as a benchmark for setting financial contracts and interest rates around the world and is overseen by the British Bankers' Association. The BBA is conducting its own review which will be published later on Wednesday. Banks are asked which rate they think they will be able to borrow from each other for periods of time ranging from overnight to 12 months in currencies including sterling, dollars, euros, yen and Swiss francs.

The FSA found that Barclays had been making submissions to the process that were intended to allow the bank to make profits through its traders speculating on interest rates and reduced the price it submitted during the financial crisis because of management concerns over negative media comment. The FSA said that Barclays' top management was concerned that the higher prices it was saying it expected to borrow at were making it appear that it had liquidity during the crisis – and so the bank ended up submitting lower prices than it would otherwise have done.

The FSA made a damning criticism of Barclays and warned other banks that more cases were to come. Tracey McDermott, acting director of enforcement and financial crime, said the misconduct was "serious, widespread and extended over a number of years".

"Making submissions to try to benefit trading positions is wholly unacceptable. This was possible because Barclays failed to ensure it had proper controls in place. Barclays' behaviour threatened the integrity of the rates with the risk of serious harm to other market participants," said McDermott.

"The FSA continues to pursue a number of other significant cross-border investigations in this area and the action we have taken against Barclays should leave firms in no doubt about the serious consequences of this type of failure."

Diamond, who has been pledging to make Barclays a better corporate citizen, is giving up his bonus for 2012 as a result.

"The events which gave rise to today's resolutions relate to past actions which fell well short of the standards to which Barclays aspires in the conduct of its business. When we identified those issues, we took prompt action to fix them and co-operated extensively and proactively with the authorities," Diamond said.

"Nothing is more important to me than having a strong culture at Barclays; I am sorry that some people acted in a manner not consistent with our culture and values."

The boss of Barclays Capital (the investment banking arm) Rich Ricci; the chief operating offer Jerry del Missier and finance director Chris Lucas are giving up their bonuses too.

Some emails:

Barclays trader talk: 'I'm opening a bottle of Bollinger'
Messages sent between Barclays' traders and the bank's 'submitters'
guardian.co.uk, Wednesday 27 June 2012 17.46 BST

The FSA report details numerous messages sent between Barclays traders and the bank's "submitters" – whose role was to send accurate information about interest rates to the British Banking Association. The submitters are not supposed to be influenced by traders.

Trader "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!"

----------------------------------------------------

Submitter "Hi all, just as an FYI, I will be in noonish on Monday."

Trader "Noonish? Who's going to put my low fixings in? hehehe."

-----------------------------------------------------

Submitter "[A manager has] asked me to put it lower than it was yesterday ... to send the message that we're not in the shit."

-----------------------------------------------------

Submitter to manager: "We are therefore being dishonest by definition and are at risk of damaging our reputation in the market and with the regulators."

-----------------------------------------------------

Trader to manager, complaining about a submitter: "[He is putting in] the highest Libor of anybody ... He's like, I think this is where it should be. I'm like, dude, you're killing us."

Manager to trader: "Just tell him to keep it, to put it low."

Submitter "[I will] see what I can do."

-----------------------------------------------------

External trader to a Barclays trader, asking for a lower Libor submission: "If it comes in unchanged I'm a dead man."

Barclays' trader promises to "have a chat".

External trader to Barclays' trader later that day: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."

-----------------------------------------------------

Trader "Coffees will be coming your way, either way, just to say thank you for your help in the past few weeks."

Submitter "Done ... for you big boy."

I'm not surprised there's others coming.  The dodgy AIG deals originated in London, so, I think, did the JP Morgan thing that broke in the last few months.

[jimmy olsen]

That's great, that would never happen here.

has forced chief executive Bob Diamond and other top executives to forgo any bonuses for 2012.

[Sheilbh]

Not enough. I think he needs to resign given that this apparently involved senior management and was going on when he was in senior management (not CEO).  I think he's damned either way.

What I'm confused by is how easy the system seems to be gamed.  Here's a better article:

Interest rate was rigged by Barclays
Mortgage holders, credit card users and small businesses may have been charged too much for their loans after one of Britain's biggest banks admitted systematically rigging financial markets.

Barclays was fined a record £290 million for repeatedly distorting basic financial data which are used to set interest rates on millions of loans and other transactions around the world.

Bob Diamond, the Barclays chief executive, said he will give up his multi-million-pound bonus over the scandal but faced calls to resign amid claims that his bank's actions posed a threat to the global market system.

As MPs suggested that a criminal inquiry should be held, financial regulators warned that other major British banks may also have been involved in attempts to manipulate data about interest rates. Up to 40 global banks face being named and shamed as part of the investigation.

The scandal relates to the London Interbank Offered Rate (Libor), the interest rate that banks pay on money they borrow from one another.

The Libor rate is one of the basic pieces of information on which trillions of pounds of financial transactions are based. It helps determine the interest rate that is applied to loans, including some mortgages, credit cards and business loans.

Libor is calculated on information about rates supplied by 15 of the world's biggest banks, which are under strict obligations to provide accurate figures.

British and American regulators yesterday concluded that, between 2005 and 2009, Barclays traders and managers repeatedly made "false reports" in order to push Libor and other interest rate measures higher or lower than its true rate. The manipulations helped increase traders' profits and protected Barclays' reputation. They also raise the prospect of consumers and businesses paying the wrong rate of interest.

Market rules dictate that bank staff who report interest rates for calculating Libor are supposed to be isolated from traders who have a financial interest in the rates.

The Financial Services Authority and the US Commodity Futures Trading Commission found that Barclays staff systematically broke those rules.

Emails sent by Barclays traders to staff submitting Libor data showed their demands for artificially high rates. "I was hoping we could set the 1-month and 3-month Libors as high as possible," wrote one trader in 2006.

Another, sent later that year, told a data-submitter to "go crazy with raising 3-month Libor". Replies showed that Barclays rate-submitters readily complied. "Done...for you big boy," wrote one.

An external trader emailed a Barclays trader to state: "If it [Libor] comes in unchanged I'm a dead man". The Barclays trader said he would "have a chat" and the submission was later lowered.

The external trader thanked the Barclays trader and added: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."

From 2005 until the summer of 2007, Barclays' attempted manipulation was driven by traders trying to increase profits on their own deals using complex financial instruments. But when the credit crunch began in August 2007, regulators found, the bank's senior management began to direct the false reporting activities.

During the first years of the crisis, Barclays frequently paid higher interest rates than other banks due to concerns about its financial position. Regulators found that in order to protect Barclays' reputation, the bank's senior management instructed staff to make artificially low Libor submissions "routinely".

Lord Oakeshott, a former Liberal Democrat Treasury spokesman, described the bank as "a casino that was rigging the wheels and loading the dice". He added: "If Bob Diamond had a scintilla of shame, he would resign."

Andrew Tyrie, the chairman of the Commons Treasury select committee, said Barclays had put at risk the integrity of the financial markets, with potentially serious consequences for British consumers. "This is tantamount to lying," he said. "This could have affected hundreds of thousands of homeowners by forcing them to pay more for their mortgages." Ray Boulger, of John Charcol, a mortgage broker, estimated that about 250,000 mortgage customers have loans with rates linked to Libor.
Mark Harris, of Savills Private Finance, said that among the individuals most likely to have been affected would be buy-to-let investors and those buying very expensive homes. Chris Leslie, a Labour shadow Treasury spokesman, suggested that a criminal investigation may be necessary.

Barclays said that the fines related to actions in the past which fell "well short" of its standards. Mr Diamond, who was paid more than £17million last year, said: "I am sorry that some people acted in a manner not consistent with our culture and values." The bank has disciplined several staff and the settlement is expected to see more employees leave.

I'm also not clear how this isn't illegal.  Those trades before the crisis hit would be interesting because that would seem to be a reason for perhaps examining bankers' pay.

[mongers]

Not enough. I think he needs to resign given that this apparently involved senior management and was going on when he was in senior management (not CEO).  I think he's damned either way.

What I'm confused by is how easy the system seems to be gamed.
....

Shelf, you still have some faith in the 'system' ?

[Admiral Yi]

  Nice cropping Mongers.

[citizen k]

Not enough. I think he needs to resign given that this apparently involved senior management and was going on when he was in senior management (not CEO).  I think he's damned either way.

What I'm confused by is how easy the system seems to be gamed.
....

Shelf, you still have some faith in the 'system' ?

Pollyanna has a little brother.

[Neil]

Since 290 million is nothing, I guess we're saying that this is acceptable?

[CountDeMoney]

Since 290 million is nothing, I guess we're saying that this is acceptable?

Hell, it's 290 million lbs more than anything Wall Street would ever have to give up.  Win's a win these days.

[alfred russel]

Since 290 million is nothing, I guess we're saying that this is acceptable?

Hell, it's 290 million lbs more than anything Wall Street would ever have to give up.  Win's a win these days.

I don't know--I wouldn't be surprised if they pay out a lot more than that through lawsuits in the US.

[Admiral Yi]

The SEC dings folks for a cuppa too tree hunnert million all the time.

[CountDeMoney]

I don't know--I wouldn't be surprised if they pay out a lot more than that through lawsuits in the US.

By who?  Grandma "I have 50 shares of US Steel" Stockholder and her country lawyer?  The only thing Wall Street has more of than brokers is them fancy law talkers.

Hell, they've only found less than half of Madoff's $17B so far.  And that was a criminal prosecution.

[CountDeMoney]

The SEC dings folks for a cuppa too tree hunnert million all the time.

Peanuts!  And they wind up mitigating that shit anyway. 

[Admiral Yi]

Peanuts!  And they wind up mitigating that shit anyway.

I've missed the last couple issues of Mother Jones.  What do you mean by mitigating?

[alfred russel]

I don't know--I wouldn't be surprised if they pay out a lot more than that through lawsuits in the US.

By who?  Grandma "I have 50 shares of US Steel" Stockholder and her country lawyer?  The only thing Wall Street has more of than brokers is them fancy law talkers.

Hell, they've only found less than half of Madoff's $17B so far.  And that was a criminal prosecution.

No, Grandma with her 50 shares of US Steel will be located by a Wall Street lawyer who will put together a class action lawsuit. A fair estimate of the damages will be $2 billion, the lawyer will settle with the firm for $500 million. In securities class action lawsuits often have half the award or more going to legal and administrative costs, so Granny's lawyers will be well paid, while Grandma will get pennies on the dollar for her losses.

[CountDeMoney]

Peanuts!  And they wind up mitigating that shit anyway.

I've missed the last couple issues of Mother Jones.  What do you mean by mitigating?

They can settle with the SEC for reduced fines costs.  Just like anybody else getting gigged by the G-Man in any other industry.