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QuoteBarclays 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:

QuoteBarclays 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.

That's great, that would never happen here.

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

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:

QuoteInterest 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.

Quote from: Sheilbh on June 27, 2012, 06:15:59 PM
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' ? :blink:

:cheers:  Nice cropping Mongers.

Quote from: mongers on June 27, 2012, 06:20:09 PM

Quote from: Sheilbh on June 27, 2012, 06:15:59 PM
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' ? :blink:

Pollyanna has a little brother.

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

Quote from: Neil on June 27, 2012, 06:59:08 PM
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.

Quote from: CountDeMoney on June 27, 2012, 07:05:40 PM

Quote from: Neil on June 27, 2012, 06:59:08 PM
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.

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

Quote from: alfred russel on June 27, 2012, 07:33:59 PM
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.

Quote from: Admiral Yi on June 27, 2012, 07:39:19 PM
The SEC dings folks for a cuppa too tree hunnert million all the time.

Peanuts!  And they wind up mitigating that shit anyway. 

Quote from: CountDeMoney on June 27, 2012, 07:40:38 PM
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?

Quote from: CountDeMoney on June 27, 2012, 07:39:33 PM

Quote from: alfred russel on June 27, 2012, 07:33:59 PM
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.

Quote from: Admiral Yi on June 27, 2012, 07:42:07 PM

Quote from: CountDeMoney on June 27, 2012, 07:40:38 PM
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.

I once had a Barclay's account. :(

Quote from: garbon on June 27, 2012, 07:53:52 PM
I once had a Barclay's account. :(

:lol: Of course you would've had one for Karen Barclay's.

Quote from: alfred russel on June 27, 2012, 07:33:59 PM
I don't know--I wouldn't be surprised if they pay out a lot more than that through lawsuits in the US.

Yeah, the real costs will be through lawsuits.  And given the warning that other banks are affected this looks like it could be far more costly in total, from the Economist:

QuoteBarclays' LIBOR embarrassment
Eagle fried
Jun 27th 2012, 22:27 by R.D.


WHEN a trader asks a colleague to submit false information in order to boost his profits, the correct answer is not "donefor you big boy". This response was one of a host of exchanges involving 14 Barclays traders that were revealed this week as part of a probe by Britain's Financial Services Authority (FSA) and American agencies including the Commodities Futures Trading Commission (CFTC) and the Department of Justice (DoJ).

The probe relates to LIBOR, the London inter-bank offered rate. LIBOR is supposed to be a trusty financial yardstick, measuring the costs banks face when they borrow from one another. Set each day, LIBOR determines the prices of loans and derivatives contracts worth several multiples of global GDP. The flaw in the system is that banks can estimate their own LIBOR rates. Although these estimates are supposed to be calculated by a team that is ringfenced from other parts of the bank, the probe shows that they were influenced at the behest of Barclays' traders.

Back in 2006 the Barclays staff involved had little thought for the wider ramifications of distorting LIBOR. They had more important things on their minds, like champagne. Asked to fudge the numbers by a competitor bank, Barclays acquiesced. The grateful reaction: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."

The traders involved were those placing bets on interest-rate derivatives. These contracts are large enough—the total market was worth $554 trillion in 2011—that small price changes can mean big profits. Indeed, other messages revealed that for each basis point (0.01%) that LIBOR was moved, those involved could net "about a couple of million dollars". Given this sort of payoff, one bottle of Bollinger seems a bit mean.

For Barclays, this is beyond embarrassing. The e-mails—the FSA tracked 257 messages asking for LIBOR and its yen and euro equivalents to be altered—make painful reading. The fact that the investigation involved the FBI is a reputational disaster in itself. To its very slight credit, Barclays has not blamed this on rogue traders: its CEO, Bob Diamond, and other senior executives have positioned this as a failing of the bank as a whole. Mr Diamond and three other senior staff have volunteered to forgo their annual bonus this year.

The savings will not offset the fines Barclays has been handed. The bank received a £60m ($93m) fine from the FSA, the biggest ever doled out by the regulator (even after a 30% reduction because Barclays co-operated). This number still pales beside the penalties imposed by the CFTC and DoJ, which brought the total fine to £290m, around 10% of pre-tax profits in the bank's most recent financial year.

The share price actually rose on news of the settlement: investors presumably hope this will draw a line under the LIBOR investigation. But the FSA's report includes a mine of information on exactly how and when LIBOR was being manipulated. This will be useful for claimants in civil cases being brought against Barclays in America, says Anthony Maton of Hausfeld, a law firm representing claimants there. Barclays is also likely to face new civil cases, including in Britain, as customers on the wrong side of LIBOR movements bring claims.

Other banks have reason to fret. At least 12 banks are involved in LIBOR investigations around the world: the Barclays fines may herald similar penalties for other lenders. More disturbing still, if banks did distort money markets then they affected anyone with a LIBOR-linked contract. That would open them up to claims stretching far beyond their own customers. 


Unusually, Barclays has not sought to blame this on rogue traders: intead its CEO, Bob Diamond, and other senior executives have positioned this as a failing of the bank as a whole. Mr Diamond and three other senior staff volunteer to forgo their annual bonus this year.

But the all-in cost to the bank could run much higher. First, the FSA's report includes a mine information on exactly how and when LIBOR was moved. This will be useful for claimants in civil cases being brought in America, according to Anthony Maton of Hausfeld LLP, a law firm representing claimants there. Second, Barclays is also likely to face new civil cases, including in Britain, as customers on the wrong side of LIBOR movements bring fresh claims. The time limit for bringing such a claim is 6 years, so LIBOR could drag profits for years to come.

Barclays shares are down 20% and the FSA's reminded everyone they're investigating a number of banks over this.  Some analysts are saying this could turn into a crisis of confidence in systemically important institutions - and confidence matters more to banks than most institutions :ph34r:

Quote from: Sheilbh on June 28, 2012, 07:18:17 AM
Barclays shares are down 20% and the FSA's reminded everyone they're investigating a number of banks over this.  Some analysts are saying this could turn into a crisis of confidence in systemically important institutions - and confidence matters more to banks than most institutions :ph34r:

Makes the 'rescue' of 2008 look more of a FAIL every day.  :ph34r:

We need a public inquiry into banking and the crisis.  In this how did the regulators fail to notice?  Also surely this is fraud? :blink:

QuoteBarclays Libor Fine Sends Stocks Lower as Probes Widen
By Joshua Gallu, Silla Brush and Lindsay Fortado on June 28, 2012

Barclays Plc (BARC)'s record $451 million fines for interest rate manipulation sent bank shares plunging as U.S. and U.K. authorities pursue sanctions in a global investigation of more than a dozen lenders.

Barclays shares dropped as much as 18 percent as U.K. Chancellor of the Exchequer George Osborne called for a criminal probe amid speculation that lenders could face billions of dollars in lawsuits.

Traders at the U.K.'s second-biggest bank by assets routinely coordinated with counterparts from at least four other banks in an attempt to move interest rate benchmarks, according to documents released yesterday by the U.S. Commodity Futures Trading Commission, the U.S. Justice Department and the U.K. Financial Services Authority. The benchmarks included the London interbank offered rate, or Libor, and Euribor, a related euro- denominated rate. In both cases, the goal was to generate profits on derivatives held by the banks, the agencies said.

"It's going to put a great deal of pressure on the other banks to settle because somebody has set a precedent," said Jerry W. Markham, a law professor at Florida International University, a former chief counsel in the CFTC's enforcement division.

The case offers the most detailed public account yet of conduct that prompted regulators and criminal authorities spanning three continents to investigate whether traders colluded to rig interest rates and banks sought to bolster their perceived stability by hiding their true costs of borrowing during the financial turmoil of 2008.

Record Fines
At stake is the credibility of the decades-old Libor system and the securities and loan products that rely on it, ranging from an estimated $554 trillion in interest-rate contracts, according to the FSA, to mortgage and credit-card payments made by consumers around the world.

Barclays pledged to pay $200 million to the CFTC, $160 million to the Justice Department, and 59.5 million pounds ($91 million) to the FSA. The fines were the largest in the history of the CFTC and FSA.

Barclays tumbled 11.5 percent to 173.45 pence at 1:19 p.m. in London as Chief Executive Officer Robert Diamond came under pressure from lawmakers.

Fraud Office
"We expect that the cost of lawsuits related to Libor manipulation will dwarf the fines imposed on Barclays," said Sandy Chen, a banks analyst at Cenkos Securities Plc in London, who is "penciling in multi-year provisions that could run into the billions."

Prosecutors at the U.K. Serious Fraud Office are now investigating the case, Osborne told lawmakers in Parliament today, calling the matter "a shocking indictment of the culture of banks."

Prime Minister David Cameron told reporters in northern England that Barclays has "some questions to answer," while Matthew Oakeshott, a member of the Liberal Democrat party who sits in Parliament's upper House of Lords, called on Diamond to step down.

Citigroup Inc. (C) (C), Royal Bank of Scotland Group Plc, UBS AG (UBSN), ICAP Plc (IAP), Lloyds Banking Group Plc (LLOY) and Deutsche Bank AG are among the firms regulators are investigating. A total of 18 banks are surveyed as part of the process of determining Libor and related rates.

RBS shares slid as much as 14 percent today, Lloyds fell as much as 7.8 percent and ICAP dropped as much as 4.7 percent. UBS was down as much as 3.5 percent, and Deutsche Bank declined as much as 5.5 percent.

Assisting Probe
Barclays is assisting the investigation into other firms and individuals, and was the first to provide "extensive and meaningful cooperation," the Justice Department said. Zurich- based UBS last year disclosed it had opened its doors to U.S. antitrust investigators in exchange for immunity.

"Over the next relatively short period of time, others are going to have to decide whether either to settle or to fight," Daniel Waldman, a Washington-based partner at Arnold & Porter LLP and former CFTC general counsel, said in a telephone interview.

Libor is derived from a survey of banks conducted each day on behalf of the British Bankers' Association in London. Lenders are asked how much it would cost them to borrow from each other for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs. After a set number of quotes are excluded, those remaining are averaged and published for each currency by the BBA before noon.

Chinese Walls
Regulators have focused on the lack of so-called Chinese walls to separate traders from employees making interest-rate submissions on behalf of their banks. They are also looking into whether the banks' proprietary trading desks exploited the information they had about the direction of Libor to trade interest-rate derivatives.

Since March, a group of U.K. bankers and regulators has been reviewing how Libor is set. The group, established by the BBA, has so far resisted calls to overhaul the rate because structural changes risk invalidating trillions of dollars of contracts.

Joseph Eyre, an FSA spokesman, said "the BBA's review is continuing and we will consider any recommendations arising from that exercise."

Attempts to influence the rates began several years before the financial crisis, regulators said. Between 2005 and 2008, Barclays's euro swaps traders coordinated with counterparts at other banks in attempts to manipulate Euribor, according to the CFTC and Justice Department.

Daily Discussions
Barclays's employees overseeing Euribor submissions routinely accommodated requests that benefited trading positions at other banks, which were sometimes passed along by former Barclays traders who had left for other financial institutions.

One senior euro swaps trader employed at the time by Barclays spoke daily with traders at other banks about how to change the official Euribor rate in a manner that benefited trading positions, the CFTC said. The agency didn't name the other banks.

On Nov. 10, 2006, for example, a trader at a bank identified by the CFTC as "bank A" asked the Barclays trader to request a low one-month Euribor setting at Barclays and at a second bank, "bank B." The Barclays trader made a request to bank B and then sent a message to the Barclays employee responsible for Euribor submissions: "hi [senior Euribor submitter]. I know you can help. On Monday we have a huge fixing on the 1m and we would like it to be low if possible. Tx for your kind help."

'Low Fixing'
The employee responded: "of course we will put in a low fixing."

A separate instance occurred over a fourth-month period from at least December 2006 until March 2007 during which the senior Euro swaps trader tried to align trading strategies among multiple banks to influence the three-month Euribor fixing on March 19, 2007, according to the CFTC.

Barclays employees responsible for submitting rates regularly followed the requests of the bank's derivatives traders. Of 111 requests analyzed by the FSA and made by traders between January 2006 and August 2007 relating to U.S. dollar Libor, only 14 percent of submissions were inconsistent with the requests. Of 42 requests analyzed by the FSA and made by traders from February 2006 to June 2008 relating to Euribor, only 12 percent were inconsistent with requests.

Market Perceptions
While regulators detailed the attempts to manipulate the rate, they stopped short of claiming the traders were successful. That may prove a stumbling block for private lawsuits claiming that holders of securities tied to Libor were harmed by the conduct, Markham said.

"That really doesn't help the private litigant so much," Markham said of Barclays's settlement. "It doesn't really give them a road map to say, 'OK, this is why the price is artificial and here is why they caused it."'

During the 2008 financial crisis, senior managers at Barclays instructed employees to report artificially low borrowing costs to avoid appearing weaker than its competitors, regulators said.

In October 2008, a Barclays employee had a conversation with the Bank of England about market and media perceptions related to Barclays's Libor submissions, which had generally been higher than those of competitors. In reaction to the external pressure and the discussion with the central bank, Barclays believed it needed to lower its Libor submissions, the CFTC said.

'Within the Pack'
A senior Barclays manager then instructed employees to lower Libor submissions for dollars and sterling so the bank would be "within the pack," or in line with rates reported by other banks, the CFTC said.

According to the U.K.'s FSA, the Bank of England didn't instruct Barclays to lower its Libor submissions during the phone call. Instead, a "misunderstanding or miscommunication" occurred within Barclays as the substance of the conversation was relayed down the chain of command, the FSA said.

The Barclays settlement helps set a benchmark for what other banks should expect to pay and do to resolve related claims, Markham said.

"Nobody wants to go first, but once they do it becomes easier for the other parties," said Markham, who added that most regulatory cases are settled, not contested in court. "It's become the cost of doing business."

To contact the reporters on this story: Joshua Gallu in Washington at [email protected]; Silla Brush in Washington at [email protected]; Lindsay Fortado in London at [email protected]

To contact the editors responsible for this story: Maura Reynolds at [email protected]; Edward Evans at [email protected]

I agree with Dan Hodges.  I'm sick of talk about changing the culture of banking.  Let's just regulate them.

I have not had time to look at all this in detail, at first blush it looks like criminal activity to me, I'm losing all patience with the fuckers.....sorry....bankers.

Damn, I chose the wrong line of business. I'd like to be in one where the penalty for a serious long-term criminal activity is that I don't get a bonus.

Quote from: Richard Hakluyt on June 28, 2012, 11:32:12 AM
I have not had time to look at all this in detail, at first blush it looks like criminal activity to me, I'm losing all patience with the fuckers.....sorry....bankers.

Agreed.  I think we should prosecute them (pour encourager les autres) and start heavily regulating them.  If they want to go to Zurich then they can.  As it is they're too much of a liability :bleeding:

Quote from: Sheilbh on June 28, 2012, 01:14:07 PM

Quote from: Richard Hakluyt on June 28, 2012, 11:32:12 AM
I have not had time to look at all this in detail, at first blush it looks like criminal activity to me, I'm losing all patience with the fuckers.....sorry....bankers.

Agreed.  I think we should prosecute them (pour encourager les autres) and start heavily regulating them.  If they want to go to Zurich then they can.  As it is they're too much of a liability :bleeding:

It's an interesting moral question.  Does make sense to regulate an industry based entirely on graft and fraud out of existance, even though it will result in tremendous hardship and a return to poverty for most Britons?

Another FSA probe.  Nothing in comparison to fiddling with LIBOR or EURIBOR, but another example of why it's time to stop worrying that banks are so sensitive:

QuoteBarclays missold financial products to small businesses
Bob Diamond faces fresh pressure amid Libor scandal as FSA says four banks must redress customers over serious failings
Jill Treanor, City editor

Bob Diamond is facing fresh pressure about the conduct of Barclays bank after the Financial Services Authority cited it as one of four high street banks that missold financial products to small businesses.

Bailed-out banks Lloyds Banking Group and Royal Bank of Scotland as well as Barclays and HSBC will be required to pay redress to customers who lost out as a result of products they were sold to protect against movements in interest rates over the past 10 years, under an agreement reached with the City regulator in the early hours of Friday morning.

The discovery of "serious failings" in the sale of these so-called interest rate swaps comes as the banking industry is mired in controversy about manipulating interest rates following the record-breaking £290m fine slapped on Barclays on Wednesday.

Diamond is refusing to quit despite David Cameron's call for accountability at the top of the bank in what has been described as a "shocking indictment" of the banking industry culture. The fine on Barclays, which was announced after the bank settled with the FSA and two US regulators, is part of an international investigation into up to 20 banks over the attempted manipulation of interest rates known as the London interbank offered rate (Libor) and the Euro interbank offered rate (Euribor), between 2005 and 2009. They are benchmark rates that play a crucial role in determining the cost of borrowing for households and companies. RBS and Lloyds are also co-operating with regulators over this investigation.

Friday's announcement by the FSA about interest rate swap misselling follows a two-month review during which 100 customers came forward to complain about their treatment by the banks, which sold 28,000 of these products intended to help protect against interest rate movements during a 10-year period.

Martin Wheatley, who is to head the Financial Conduct Authority when it is spun out of the FSA next year, said the bosses of the relevant parts of the bank – Diamond at Barclays, Antonio-Horta Osorio, the chief executive of Lloyds, and the heads of corporate banking at RBS and HSBC, Chris Sullivan and Brian Robertson, respectively – would take personal responsibility for resolving the situation.

"They have also committed that, except in exceptional circumstances, they will not foreclose on or vary existing lending facilities without the customer's prior consent," Wheatley said.

The regulator is keen to avoid a re-run of the payment protection insurance misselling scandal which, while on a much larger scale, was delayed for years while the banks argued with the FSA in the courts.

"I am pleased that Barclays, HSBC, Lloyds and RBS have agreed to do the right thing by their customers and offer redress or a review of past sales," Wheatley said. "These firms have responded to the need to provide a fair deal for customers by working with us, and I welcome this outcome."

Calculating the amount of redress to each customer is likely to be complex as some products may need to be cancelled and the FSA has not put a timescale on when the redress must be agreed. An independent scrutineer will be appointed and the FSA will oversee the process.

The British Bankers' Association issued a statement on behalf of the high street banks: "Our members have been working closely with the FSA while it carries out its thematic review into interest rate swaps and will continue to co-operate fully."

HSBC said it had sold 171 of the most complex products scrutinised by the FSA over the 10 years under review and 79 of these were still in existence. Those customers had been contacted since April and offered help with "remediation".

HSBC sold around 7,000 of a simpler type of interest rate product.

Lloyds said the cost of the redress would not impact on the bank's finances – unlike PPI which has cost £3.7bn.

Barclays said it had co-operated fully with the FSA. "Where we have made mistakes in the way we have provided these for clients we are committed to resolving them," a spokesman said.

QuoteBob Diamond cuts up rough as he quits Barclays
Chief executive forced out as he prepares riposte over Libor rate-fixing scandal
Jill Treanor, City editor
guardian.co.uk, Tuesday 3 July 2012 21.06 BST

Bob Diamond, the boss of Barclays who has resigned from the embattled bank , was expected to come out fighting for his reputation on Wednesday when he appears before a powerful committee of MPs.

The high-profile and outspoken banker is expected to unleash a wave of explosive revelations about the role of City watchdogs and senior Whitehall figures in the manipulation of crucial interest rates that landed the bank with a record £290m fine last week.

The chancellor, George Osborne, who had been putting the banker under intense pressure to quit, said his sudden resignation was "the right decision for Barclays – and for the country". "I think Bob Diamond's resignation is the first step towards the new age of responsibility we need to see."

After an extraordinary 24 hours during which the bank's chairman, Marcus Agius, quit only to be temporarily reinstated once Diamond had departed, the role of Bank of England officials in the rate-rigging scandal is likely to take centre stage in the hearing with MPs.

With Barclays in turmoil, Diamond is fighting for his own reputation, which politicians have used to symbolise the culture of greed in City banking. Diamond, under pressure from the banking regulator and the governor of the Bank of England, Sir Mervyn King, quit after he decided he would be the lightning rod for the scandal at the hearing.

The American-born banker, who could be in line for a payoff of £22m, is facing pressure to walk away with nothing after being paid £100m by the bank in the past six years. There are also calls by shareholders for the bank to look at ways of clawing back bonuses paid in the past.

In a statement, Diamond said: "I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."

At his appearance before the Treasury select committee of MPs – chaired by the Conservative MP Andrew Tyrie whom the government has also appointed to lead a parliamentary inquiry into banking, Diamond will try to explain the bank's actions for the period between 2005 and 2009, when the attempts to manipulate Libor took place.

Barclays released an email written by Diamond recording a conversation with Paul Tucker, the deputy governor of the Bank of England, in October 2008 that will be scrutinised by the MPs.

The sequence of events unleashed by the email in the darkest days of the banking crisis also forced the departure of Jerry del Missier, who was Diamond's closest colleague at the bank.

Del Missier, a Canadian, was promoted to chief operating officer a fortnight ago, but was named as the top executive who instructed more junior staff to lower the bank's submissions to the key benchmark rate, the London interbank offered rate (Libor), at the centre of the current scandal.

But MPs will be keen not to let the controversy over the potential involvement of the Bank of England – and unnamed Whitehall officials – to detract from regulatory evidence that prior to the 2008 crisis Barclays traders were attempting to manipulate Libor to help boost the bank's profits. Emails showing "this one's for you big boy" and references of bottles of Bollinger champagne are hard for the bank to explain.

Diamond will admit that in the period from 2005 to 2007, when traders were trying to profit from Libor movements, the bank – along with others – believed it was a low-risk business and that it did not have systems in place to prevent the manipulation taking place.

A submission by the bank to the Treasury select committee of MPs ahead of Diamond's appearance, shows that the former chief executive will say there was no knowledge by anyone in the bank above desk supervisor level of this conduct at the time.

"Senior management were not aware," the Barclays submission says.

In the submission, the bank was quick to apologise. "These explanations are in no way intended to excuse any of the events that occurred. These events should never have taken place, and Barclays deeply regrets that they did," the document said. The Libor rigging takes two phases – the first period from 2005 when traders were changing rates at the request of rivals and colleagues and the second during the banking crisis when a conversation between Tucker and Diamond is becoming a key focus.

Diamond has made clear that he did not believe Tucker had ordered him to lower the bank's submission to Libor – to help avoid any false impression that the bank was in difficulty – but del Missier interpreted Diamond's remarks in a different way.

But the reference in the email to Whitehall sources asking Tucker why Barclays' submissions were higher than those of its rivals sparked speculation about potential involvement from government ministers.

Alistair Darling, the former Labour chancellor, said it was important the Treasury select committee "at the earliest possible opportunity" called Tucker to give his account of the conversation with Diamond. He added he had made no calls to the bank asking them to put pressure on anyone to lower Libor rates.

Asked if the Bank of England had ordered the banks to lower its rates he said: "I would find it absolutely astonishing that the bank would ever make such a suggestion and equally I can think of no circumstances that anyone certainly in departments for which I was responsible – the Treasury – would ever suggest wrongdoing like this.".

He added: "At the time these calls were made in 2008 it was just after Lehmans had collapsed, and just after the bank rescues, one of the things you looked at was how much it was costing banks to borrow because that gave you an assessment of their financial standing that is why it was so critically important."

He said the way to get the Libor rate down at the time was through policy such as credit guarantee scheme, and the special liquidity scheme.

A spokesman for another minister at the time, Lady Vadera, said: "She has no recollection of speaking to Paul Tucker or anyone else the Bank of England about the price setting of Libor."

Diamond is expected to tell MPs that when he was running the investment banking arm, Barclays Capital, the bank told the British Bankers' Authority, which ran the rate-setting process, that it was "consistently concerned" during the crisis about the lower rates being submitted by rivals. In the Lords, Lord Myners, Labour's City minister during the banking crisis, contended that the BBA executive had been warned of Libor rate-rigging, but chose to do nothing about it.

Myners said: "What we need to do is to understand what went wrong here, which has cost this country so much – 7% of national output in perpetuity, millions of people placed in a position of distress, unemployment, worry about their mortgages – they're not going to be satisfied by an inquiry led by politicians."

The anger unleashed by the fine on Barclays – which is expected to be followed by regulatory actions – has led the government to attempt to set up a committee of Lords and MPs into banking. MPs will be asked to vote on Thursday whether to set up a parliamentary inquiry of peers and MPs into the banking crisis, as proposed by the government, or instead set up a judge-led inquiry, as proposed by Labour.

In the absence of any further private talks in advance of the vote, Labour will lose and will then have to decide whether to co-operate with the parliamentary inquiry or in effect block any inquiry by refusing to sit on the committee.

Ministers are already preparing to accuse Labour of running to hide from its responsibilities for the banking crisis if it blocks an inquiry, and continues to insist only a Judge led inquiry will be effective.

It's worth remembering that, from what I can gather, Barclays has come first because it cooperated very fully with the DoJ and FSA.  There are other banks in the UK, US and Europe who are still being investigated and it looks like they were doing much the same.

Quote from: alfred russel on June 27, 2012, 07:46:17 PM
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.

Grandma with US Steel could, but grandma with Barclays maybe not.
The Supreme Court ruled a couple of years ago that US courts couldn't entertain such suits with respect to shares trading on overseas exchanges.  Which means that only purchasers of Barclays ADRs could sue under the US federal securities fraud laws.

The Serious Fraud Office has formally started an investigation into LIBOR.

Quote from: Sheilbh on July 06, 2012, 08:18:08 AM
The Serious Fraud Office has formally started an investigation into LIBOR.

I'm intrigued by the presumption of 'innocence' in this country, plenty of politicians and political commentators came straight out with "but of course there's no criminal activity" where as the same people assume anyone claiming benefits is scrounging off of the state.  :hmm:

Actually everyone I've read seems to be presuming there is criminal activity in this case :mellow:

Quote from: Sheilbh on July 06, 2012, 09:02:08 AM
Actually everyone I've read seems to be presuming there is criminal activity in this case :mellow:

I meant in the immediate response to it, it's wrong but there's nothing illegal, whereas as you say, clearer heads are now thinking this through and concluding why shouldn't some or much of this behaviour not be criminal.

Quote from: Sheilbh on June 28, 2012, 04:47:35 AM

The traders involved were those placing bets on interest-rate derivatives. These contracts are large enough—the total market was worth $554 trillion in 2011—that small price changes can mean big profits.

That's like 8-9 times world GDP, where does this money come from! :blink:

Quote from: jimmy olsen on July 06, 2012, 12:22:48 PM

Quote from: Sheilbh on June 28, 2012, 04:47:35 AM

The traders involved were those placing bets on interest-rate derivatives. These contracts are large enough—the total market was worth $554 trillion in 2011—that small price changes can mean big profits.

That's like 8-9 times world GDP, where does this money come from! :blink:

The contracts supposedly cancel each other out, so the net worth is zero. Unless one side goes bankrupt, in which case the financial system will collapse completely.

Quote from: Sheilbh on July 06, 2012, 09:02:08 AM
Actually everyone I've read seems to be presuming there is criminal activity in this case :mellow:

Just speculating but it does seem to me that a criminal case would be hard to make for the period in 08 when normal interbank lending shut down altogether.  During that time, the only truthful bid would be to non-tender.  Although Diamond's testimony didn't demonstrate any improper action by BoE, it is clear that the Bank was concerned about keeping the LIBOR quotes going as normally as possible, and rightly so.

Looks like this scandal is rapidly ballooning in significance.

http://marketday.msnbc.msn.com/_news/2012/07/11/12684779-a-scandal-over-rate-fixing-is-about-to-hit-the-us?lite

QuoteA scandal over rate-fixing is about to hit the US

© Phil Noble / Reuters / REUTERS

A branch of Barclays bank is seen in northern England.
By Roland Jones

It may seem like just another obscure banking scandal at a 322-year-old British bank, but there are a number of good reasons why you should care about the LIBOR rate-rigging scandal now roiling the world's biggest and most powerful banks, including that it probably cost you money if you own a mortgage.

In late June, Barclays paid $453 million to regulators in the U.K and the U.S. to settle accusations that it had tried to influence LIBOR, or the London interbank offered rate -- a benchmark interest rate that affects the price at which consumers and companies across the world borrow funds.

The rate, which is fixed via a poll of banks by the British Bankers' Association, an industry group in London, is the benchmark for setting payments on some $360 trillion worth of financial instruments, ranging from credit cards to more complex derivatives, such as futures contracts.
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The potential scope of the unfolding scandal, now acquiring global significance, is enormous. Other banks that have disclosed that they are under investigation for LIBOR manipulation include big U.S. banks, such as Citigroup and JPMorgan Chase, and also HSBC, Deutsche Bank and the Royal Bank of Scotland.

Economists and analysts predict the LIBOR scandal could be one of the most expensive to hit the banking sector since the financial crisis, engulfing more multinational banks with fines that dwarf the one handed to Barclays and further eroding investor confidence in the banking sector.

It has already claimed the heads of the top leaders at Barclays -- Chief Operating Officer Jerry del Missier, Chairman Marcus Agius and Chief Executive Bob Diamond -- and more heads at major banks are likely to roll, said Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corporation, a government agency designed to promote public confidence in banks.

"It depends on how pervasive it was at the other institutions," Bair told CNBC. "It sounds like it was pretty widespread."

Bart Naylor, an expert in financial regulation at the consumer advocacy group Public Citizen, said that a wave of investor lawsuits seems inevitable, especially here in the U.S.

Related: Are you making $30,000 a year or less? We want to hear from you.

Naylor said he can envisage a scenario where investors still involved in contracts that were set with erroneous LIBOR rates could call the contract null and void because it was built on incorrect information. There are likely thousands of such arrangements, he said. With more bank profits coming from derivatives trading as opposed to traditional interest incomes from loans, the potential for class action suits is significant, he said.

The potential avalanche of lawsuits has already started.

Last year the city of Baltimore sued a handful of major banks in federal court in New York, including Bank of America, JPMorgan Chase and Deutsche Bank, claiming those institutions conspired to manipulate LIBOR, which affected the city's purchase of hundreds of millions of dollars in interest-rate swaps to hedge against changes in interest rates.

The Baltimore suit has since been consolidated with those filed by other municipalities, pension funds and hedge funds.

Darrell Duffie, a professor of finance at Stanford University's Graduate School of Business, said he expects any lawsuits arising from the LIBOR scandal to cost banks in the region of billions of dollars, or tens of billions of dollars. He cautioned that it's difficult to say which, given that at this point we do not yet know the ultimate extent of the participation of other banks in the LIBOR distortions.
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"Also we do not yet know how difficult it will be to attribute how much of the distortion in LIBOR is due to the actions of each particular bank," he said, adding that he does expect some lawsuits to be effective in these areas. "But the total damages are very hard to estimate until more of the evidence appears."

Robert Shapiro, former Under Secretary of Commerce for Economic Affairs in the Clinton administration and now chairman of Sonecon, an economic advisory firm, warned Wednesday that the LIBOR scandal could become the largest financial fraud in history.

Shapiro wrote in a blog Wednesday that "coming on top of the reckless and dishonest behavior that led to the 2008 financial collapse, the LIBOR manipulations should finally dispose of the conservative case for self-regulation by Wall Street."

Shapiro notes that LIBOR was off by an average of 30 to 40 basis points for several years (one hundred basis points is equal to one percentage point in an interest rate) -- enough to add $50 to $100 to the monthly cost of a $100,000 loan. He also notes that, between 2007 and 2008, Americans held $11.1 trillion in outstanding residential mortgage debt. During the time of the alleged manipulations between 30 percent and 40 percent of that debt carried adjustable rates, Shapiro said.

"If the bankers' manipulations of the LIBOR was responsible for raising LIBOR rates by just 20 basis points in that period, their shenanigans added between $1.1 billion and $2.2 billion to the yearly interest paid by American homeowners," he said. "And those mortgages account for less than one percent of all of the financial assets and instruments affected by manipulated LIBOR rates."

Now only are banks under scrutiny, regulators are also under the microscope over the LIBOR scandal.

The Federal Reserve Bank of New York said Tuesday Barclays informed it about issues with LIBOR as early as August 2007, saying in a statement that it received "occasional anecdotal reports" from Barclays of problems with the lending rate.

The disclosure comes as Washington lawmakers start to probe how regulators handled the LIBOR scandal. On Tuesday, the Senate Banking Committee said it plans to hold meetings with individuals involved with the matter to learn more about the allegations and related enforcement actions. Those individuals include Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner, according to a statement.
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"It is important that we understand how any manipulation may impact American consumers and the U.S. financial system," said Senate Banking Committee Chairman Tim Johnson, D-S.D.

The LIBOR issue raises the question of whether regulators are keeping a close eye on banks, and whether the Fed is effectively fulfilling its role as the nation's primary banking regulator, said Public Citizen's Naylor.

"The world's credit markets depend on LIBOR to such an enormous degree that the scandal undermines confidence in regulators -- they should have seen indicators of this manipulation," he said.

The Commodity Futures Trading Commission, which along with British bank regulators brought the case against Barclays, has required the bank to put measures in place to ensure its transactions are given the most weight in determining LIBOR. The bank must also place firewalls between traders and the employees who make LIBOR submissions.

QuoteOther banks that have disclosed that they are under investigation for LIBOR manipulation include big U.S. banks, such as Citigroup and JPMorgan Chase, and also HSBC, Deutsche Bank and the Royal Bank of Scotland.

Oh yeah, HSBC;  the same people that announced 30,000 job cuts last year, and another 25,000 by 2013, on the same day they announced their half-year profits of $11.5 billion. 

Nice guys.  Hope they all go to jail and get ass-raped.

profits or revenues?

and blame the stock market. it's the common people you should hate Cdm. "a 0.001% drop in revenue? sell mother fucker sell!"

And CEO's too. you can hate them. Really, hate everyone, it's the only way to be sure.

Quote from: Sheilbh on July 06, 2012, 08:18:08 AM
The Serious Fraud Office has formally started an investigation into LIBOR.

Damn, that's when you know the shit has hit the fan.  The Jovial Fraud Office has nothing on those guys.

Quote from: CountDeMoney on July 11, 2012, 05:26:12 PM
Oh yeah, HSBC;  the same people that announced 30,000 job cuts last year, and another 25,000 by 2013, on the same day they announced their half-year profits of $11.5 billion. 

Nice guys.  Hope they all go to jail and get ass-raped.

If bankers are overpaid gangsters, isn't laying them off a good thing?

It goes on:

QuoteU.S., UK fine ICAP, charge former staff over Libor rigging
By Kirstin Ridley and Clare Hutchison
Wed Sep 25, 2013 11:41am EDT

(Reuters) - U.S. and British authorities on Wednesday fined ICAP, the world's biggest interdealer broker, $87 million and criminally charged three former employees for their role in the Libor benchmark rate rigging scandal.

The scandal, which has laid bare the failings of regulators and bank bosses, has triggered a sprawling global investigation that has already seen three banks fined $2.6 billion, four individuals charged, scores of institutions and traders grilled and a spate of lawsuits launched.

The U.S. Department of Justice (DoJ) charged New Zealand resident Darrell Read alongside Daniel Wilkinson and Colin Goodman, both from England, with conspiracy to commit wire fraud and two counts of wire fraud in a criminal complaint.

Simultaneously, the U.S. Commodity Futures Trading Commission (CFTC) and UK Financial Conduct Authority (FCA) ordered ICAP's ICAP Europe Ltd unit (IEL) to pay $65 million and 14 million pounds ($22 million), respectively, to settle allegations of wrongdoing.

"These three men are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties," said acting assistant attorney General Mythili Raman of the DoJ's criminal division.

They each face a maximum penalty of 30 years in prison for each count in the event of a successful conviction.

LORD LIBOR

ICAP, run by London businessman Michael Spencer, is the first interdealer broker sanctioned for manipulating benchmark rates such as Libor, the London interbank lending rate, which is used to price trillions of dollars worth of products such as derivatives and mortgages worldwide.

Brokers like ICAP, which match buyers and sellers of bonds, currencies and swaps, have faced allegations that their employees actively colluded with traders seeking to fix rates for personal gain - and were handsomely rewarded.

Wilkinson, employed in the London office of ICAP, supervised a group of derivatives brokers, including Read, who specialized in yen-based products.

According to the charges, the desk's biggest client between 2006 and 2009 was Tom Hayes, the former UBS and Citigroup trader who is also facing criminal charges in Britain and the United States.

Read talked to Hayes almost daily, prosecutors said, and a big part of the ICAP traders' compensation was tied to the business generated by him.

Goodman, a cash broker in ICAP's London office nicknamed "Lord Libor", was meanwhile in contact with derivatives traders at other banks and sent out a daily email with "SUGGESTED LIBORS", prosecutors said.

Hayes allegedly sent requests in through derivatives traders, who passed them on to Goodman. In 2006, prosecutors said, Read asked Goodman to suggest a high six-month rate, saying: "the trader from ubs Tokyo will come over and buy you a curry himself!".

The conduct stretched into 2010, well after allegations of Libor manipulation had surfaced in the public.

"We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate yen Libor," said ICAP Chief Executive Michael Spencer in a statement.

Tracey McDermott, the head of enforcement at the FCA, said the misconduct cast a shadow over the financial services industry as she denounced the "cavalier disregard" the ICAP subsidiary had shown both for its regulatory obligations and the interests of the markets.

AUTHORITIES CLOSE IN

Three banks - Britain's Barclays and RBS and Switzerland's UBS - have paid around $2.6 billion to date to secure civil settlements for rate rigging with UK and U.S. regulators. Britain's Serious Fraud Office (SFO) has leveled criminal charges at three individuals, and U.S. prosecutors have now charged five.

Both have charged Hayes, a Briton being prosecuted in Britain, who once complained in a text message to the Wall Street Journal: "This goes much higher than me."

The cash-strapped SFO has said it hopes to charge more individuals over Libor rate rigging this autumn and has tried to reassure critics it will not hesitate to also pursue senior industry figures or even institutions.

Rabobank, a Dutch bank cooperative, is now expected to become the fifth institution fined by U.S. and UK regulators. Others, such as Deutsche Bank, do not expect to reach a settlement until next year.

(Additional reporting by Aruna Viswanatha, Douwe Miedema; Editing by Carmel Crimmins and Will Waterman)

Some of the choicer quotes from the report:
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/icapquotes.pdf

QuoteFebruary 29, 2008 (via text message to personal mobile phone) (emphasis supplied):
Derivatives Broker 1: If u can pls move 3m up more than 6m wud be much appreciated :-P
Cash Broker 1: What happens if they go down. 3m looked higher yesterday pm and 6m no change
Derivatives Broker 1: Make 6m go lower! They r going up. [Senior Yen Trader] will buy you a ferrari next yr if you move 3m up and no change 6m
Cash Broker 1: Not bad isuppose 9625 against 01625
...
April 18, 2007 (emphasis supplied):
Cash Broker 1: Hi [Yen Desk Head] with ubs how much does he appreciate the yen libor scoop? It seems to me that he has all his glory etc and u guys get his support in other things. I get the drib  and drabs. Life is tough enough over here without having to double guess the libors every morning and get zipper-de-do-da. How about some form of performance bonus per quarter from your b bonus pool to me for the libor service ***
Yen Desk Head: Lord Baliff, I would suggest a lunch over golden week.Monday or Tuesday if you are around. *** As for kick backs etc we can discuss that at lunch and I will speak to [Senior Yen Trader] about it next time he comes up for a chat.
...
June 4, 2007 (message sent to Derivatives Broker 1) (emphasis supplied):
Yen Desk Head: [I need] to cover [Cash Broker 1] with future bonus payments that I had to promise him ... if you could speak to [Senior Yen Trader] out of hours and hint that [Cash Broker 1] had said he would stop giving the libor"flows" then maybe [Senior Yen Trader] could push [his supervisor at UBS] to make the payment, [Senior Yen Trader] said if it were down to him it would be paid as [Cash Broker 1] makes him loads of money and i had to commit to paying lord baliff a regular bonus because basically ... he said it was all over and he would not help anymore if there was not enough money in it for him...
...
August 23, 2007 (emphasis supplied):
Derivatives Broker 1: [Derivatives Broker 3] does [RBS Yen LIBOR Back-Up Submitter] have any influence over their libor sets . . . if he does ask him to do us a favour and edge 6m up please.....think [Bank E Yen Trader] was chasing [Cash Broker 1] for a high fix as well ,so should do us all a favour. . . thanks
Derivatives Broker 3: [RBS Yen LIBOR Back-Up Submitter] is doing them this wek , he wants 6's up so will be marking them up anyway
Derivatives Broker 1: brooliant!! they are making fortunes with these high fixings!!! :-) thats UBS,RBS and [Bank E] + M'Lord should be ok!!
...
April 25, 2008:
Derivatives Broker 1: you need to make sure [UBS Yen LIBOR Submitter] doesn't move these up where he was calling them........don't want all the hard work getting shot away by your own bank.
Senior Yen Trader: i know ... i am trying
Derivatives Broker 1: it will be rather ironic if [Cash Broker 1] and [Yen Broker at Broker B] do their best and [UBS Yen LIBOR Submitter] shoots you in the foot
Senior Yen Trader: yeah just bought him a coffee!
Derivatives Broker 1: :-D could be the cheapest bribe of your life!

There's more in the link <_<

Investigations in currency market fixing are expanding:

QuoteRPT-UPDATE 3-UK opens formal probe as FX investigation goes global

Wed Oct 16, 2013 5:31pm BST
* Hong Kong probe signals investigation has reached Asia

* UK regulators say formally opening investigation

* Swiss regulator has said multiple banks potentially implicated

By Rachel Armstrong and Jamie McGeever

HONG KONG/LONDON, Oct 16 (Reuters) - The global probe into suspected price manipulation in the currency market intensified on Wednesday, with Hong Kong becoming the first authority in Asia to look into the allegations and Britain opening a formal investigation.

In echoes of the global probe into interest rate rigging, authorities are examining electronic messages between currency traders to see whether they colluded with counterparts.

Authorities in the United States, Europe and Asia are now looking into suspected price manipulation in the $5.3 trillion-a-day market.

Several media reports have suggested that traders manipulated the fixings, or snapshots of where currencies are trading at a particular time in the market, which are used to price trillions of dollars worth of investments.

Regulators and investors are looking carefully at the integrity of financial benchmarks after a global investigation into interest rate rigging led to fines for four financial firms including Switzerland's largest bank UBS.

Switzerland and the United States are already making inquiries about whether the currency traders used advance knowledge of client orders and each other's trading positions to rig the foreign exchange fixings in their favour.

The Hong Kong Monetary Authority said on Wednesday that it was talking to foreign regulators and banks about the currency market allegations.

"The Hong Kong Monetary Authority is aware of the allegations. We have been in communications with the relevant overseas regulators and (are) following up with individual banks," the de facto central bank said in a statement.

For its part, Britain's Financial Conduct Authority said it had progressed from asking banks for information relating to FX trading to opening a formal probe and is working with agencies overseas.

"Our investigations are at an early stage and it will be some time before we conclude whether there has been any misconduct which will lead to enforcement action," an FCA spokesman said.

Switzerland's financial markets regulator FINMA said earlier this month that it was investigating several Swiss banks. FINMA did not name the banks under scrutiny but said multiple banks around the world were potentially implicated.

The chairman of Credit Suisse, Switzerland's second-largest bank, told a local newspaper this month that it had not found any evidence of malpractice in the FX market following inquiries from regulators.

Investment banks, including Royal Bank of Scotland and Deutsche Bank, have handed over instant messages and emails to Britain's Financial Conduct Authority (FCA) over the summer as part of its probe, banking sources said.

Last week, a source familiar with the matter said the United States was also involved in the probe.

Authorities in the United States and Britain, RBS and Deutsche Bank have all declined to comment about the probes.

CHATROOMS

Stung by revelations of lax oversight and controls in the Libor interest rate rigging scandal, banks are pro-actively handing over information from their FX desks to watchdogs.

"It's a two-way flow of information," said a source at a U.S. bank.

A source familiar with the British inquiry said the tone of messages between foreign exchange traders was similar to exchanges between Libor derivatives traders, whose arrogance as they manipulated benchmark interest rates stunned regulators, politicians and the public in 2012.

Media reports this week suggest the investigations centre on a group of senior dealers at big banks who communicated via electronic chatrooms. The group was known by names such as "The Cartel" and "The Bandits' Club".

The most popular benchmark is the WM/Reuters "fix", which is set at 4 pm London time, using actual trades and order rates from Reuters and rivals such as EBS during a 1 minute "fix" period. WM, a unit of State Street, calculates the benchmark using the median of the trades and the orders.

Bloomberg News reported in June that traders at some banks may have pooled information about their positions through instant messages and sought to manipulate the WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set.

The WM/Reuters FX rates are used by investors and corporations looking for a rate to price their portfolios and currency holdings. Most of the main equity and bond index compilers also use the rates in their calculations.

And apparently prosecutors in the UK are planning to name co-conspirators in the LIBOR case:
http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-357054/

... the plot thickens.

Nice to see that it's being followed up on with apparent intent.

Quote from: PJL on July 06, 2012, 12:51:15 PM

Quote from: jimmy olsen on July 06, 2012, 12:22:48 PM

Quote from: Sheilbh on June 28, 2012, 04:47:35 AM

The traders involved were those placing bets on interest-rate derivatives. These contracts are large enough—the total market was worth $554 trillion in 2011—that small price changes can mean big profits.

That's like 8-9 times world GDP, where does this money come from! :blink:

The contracts supposedly cancel each other out, so the net worth is zero. Unless one side goes bankrupt, in which case the financial system will collapse completely.

I don't understand :unsure:

More important than PJL's point about every bet having a counterparty is the fact that "notional value" has virtually no signficance when discussing derivatives.  Let's say you own $100 in floating rate bonds currently yielding 2%, and want to fix that 2% (because you're an idiot) so you buy an interest rate swap, trading your variable rate for the fixed rate.  If the interest rate drops down to zero, your counterparty loses $2/year and you gain $2/year.  Yet the "notional value" of this derivative contract is $100.

Notional value concievably has more relevance to the currency swap market, in which you trade a stream of income in, say Korean won, for a fixed equivalent in greenbacks.  Concievably because either currency could theoretically depreciate to worthlessness.

But still i expect that even the volatility of exchange rates is not sufficient to render the "notional value" of currency swaps meaningful in any way.

Quote from: Jacob on October 17, 2013, 03:48:17 PM
... the plot thickens.

Nice to see that it's being followed up on with apparent intent.

Yes, it's reassuring to know that the horrifying possibility of negotiated fines are keeping those naughty guys up at night.

In the UK I don't think there'll be a settlement. From what I understand that only tends to happen when the evidence doesn't pass the test to prosecute (is there enough and is it in the public interest) and generally it's more common in cases where the company self-reported.

Your pussy prosecutors are no different than our pussy prosecutors.  They'll take the admission of guilt in exchange for fining them the equivalent of 6 weeks' profit.
Nobody who deserves it will ever go to jail, and they'll just do it all over again.

Quote from: jimmy olsen on October 17, 2013, 06:11:51 PM

Quote from: PJL on July 06, 2012, 12:51:15 PM

Quote from: jimmy olsen on July 06, 2012, 12:22:48 PM

Quote from: Sheilbh on June 28, 2012, 04:47:35 AM

The traders involved were those placing bets on interest-rate derivatives. These contracts are large enough—the total market was worth $554 trillion in 2011—that small price changes can mean big profits.

That's like 8-9 times world GDP, where does this money come from! :blink:

The contracts supposedly cancel each other out, so the net worth is zero. Unless one side goes bankrupt, in which case the financial system will collapse completely.

I don't understand :unsure:

They're selling their contracts back and forth.  So Party A holds a bunch of mortgages, and creates derivatives of them, which they sell to Party B.  Then, Party B creates derivatives of the derivatives and sells them back to Party A, which does the same.

Quote from: CountDeMoney on October 17, 2013, 07:47:10 PM
Your pussy prosecutors are no different than our pussy prosecutors.  They'll take the admission of guilt in exchange for fining them the equivalent of 6 weeks' profit.
Nobody who deserves it will ever go to jail, and they'll just do it all over again.

I'm not so sure. I think the worries about how the City of London is perceived may end up with the book being thrown at them.

I think it's misleading to call securitized assets, such as CDO's, "derivatives."

Quote from: Admiral Yi on October 17, 2013, 08:58:28 PM
I think it's misleading to call securitized assets, such as CDO's, "derivatives."

:yes: "Toxic shit" is a more apt term.

I read an Economist article during the depths of Teh Greatest Recession which claimed AAA rated mortgage-backed CDO's were trading at 97% of par.

Would that possibly reflect the fact that about a third of them were downgraded and almost 50% of write downs by big financial firms were of ABS CDOs?

Edit: Also surely those would be significantly more in demand because they're required to back a financial investment, however accurate the rating.

ABS?

Asset-backed securities, the overwhelming majority of which were backed by housing assets in some form or other.

That would be consistent withe the AAA tranches holding value and the lower tranches going to shit.

One of the points I'm trying to get at is it was very common in the reporting after the meltdown for retardo journalists to whine about CDOs going bust "even though they had been rated AAA."  I suspect that was misinformed.

It depends what your objection is or what you'd count as a legitimate whine.

A third of downgraded structured finance things were AAA. Of those around two thirds were mortgage backed and the downgrades of those securities was more severe than other securities - like corporate mortgage bonds. In addition, as I say, ABS CDOs account for almost half of the write downs of big finance and around 90% of the assets backing them were mortgage based.

The ratings really did collapse. I think the key is from there to ask the right questions which is what caused such inaccurate ratings and what can be done to prevent it? I suspect the problem was in the rating agencies calculations and models which they'll no doubt be trying to change.

Edit: Searching around it seems a big theory is that enough thought wasn't taken if there was an economic event that would affect an entire class of assets. So a significant housing downturn causes huge amounts of assets problems or corporate bonds in Asia and the markets weren't really considering that.

Quote from: Admiral Yi on October 17, 2013, 09:18:11 PM
I read an Economist article during the depths of Teh Greatest Recession which claimed AAA rated mortgage-backed CDO's were trading at 97% of par.

It's not clear whether it's a lot or a little.  If you lever a bunch of derivative derivatives on top of that asset, a 3% loss of value when 0% was expected and priced in could be disastrous.  The story of the financial meltdown was not so much the primary losses, but rather the secondary shocks.

QuoteTwenty-two more face investigation over potential Libor rigging
Three former traders in court as judge rules that others under scrutiny by SFO must not be named before they are charged
Jill Treanor
The Guardian, Monday 21 October 2013 20.42 BST

The Serious Fraud Office has written to 22 individuals to tell them they are facing investigation for potential Libor rigging, a London court heard on Monday.

None of them have been charged and some have yet to be interviewed. Southwark crown court was told about the SFO contact at a hearing attended by Tom Hayes, a former trader at investment banks Citigroup and UBS. Hayes is the first person to be charged with manipulation of the benchmark rate.

Hayes's appearance was the latest stage in the process relating to the eight charges he faces for allegedly rigging Libor.

Wearing a pale blue v-neck sweater, 34-year-old Hayes sat in the dock in a packed courtroom alongside two former traders at money brokers RP Martin, Terry Farr and James Gilmour.

None of the three entered a plea and they were given a further 28 days to plead guilty or not guilty. The Hayes trial is not likely to begin until 2015. The three defendants were granted legal aid.

The court heard that a draft of the indictments against the three had named 22 other individuals as potentially being investigated for Libor rigging. The judge said their naming does not necessarily mean they are guilty of wrongdoing.

But the identities of these individuals were not revealed in court after the judge heard representations they had not been formally charged or investigated. Their names were removed from the indictments.

The judge lifted an injunction that had been placed on the Wall Street Journal over the naming of eight of the individuals.

Hayes, the first person to be charged over Libor-related offences, spoke only to confirm his identity. He is charged with variously conspiring with Royal Bank of Scotland, JP Morgan Chase, Deutsche Bank, Rabobank, RP Martin, HSBC and Tullett Prebon.

The charges relate to periods between August 2006 and December 2009, when Hayes worked for UBS Securities Japan; and December 2009 and September 2010, when he worked for Citigroup Global Markets Japan.

The charges allege that Hayes conspired to manipulate yen interbank offered rates. A charge relating to "other, unspecified, interbank offered rates" has been removed.

Gilmour has been charged with one count of conspiracy to defraud, between August 2006 and December 2009, and Farr faces two counts covering the same alleged offence.

LOL, "Stop, or we'll say 'Stop' again."

QuoteEU fines global banks $2.3 bln for market rigging
By Associated Press, Updated: Wednesday, December 4, 9:03 AM

AMSTERDAM — The European Commission has fined a group of major global banks a total of 1.7 billion euros ($2.3 billion) for colluding to profit from the manipulation of key interest rates.

The banks, which include JP Morgan, Citigroup and HSBC, are accused of manipulating for years European and Japanese benchmark interest rates that affect hundreds of billions of dollars in contracts globally, from mortgages to credit card bills.

The Commission, the EU's executive arm, is only the latest to punish banks for profiting from manipulating interest rates, after similar cases brought by U.S. and national European market regulators.

"We want to send a clear message that we are determined to find and punish these cartels," competition commissioner Joaquin Almunia said Wednesday.

The banks named as participating in cartels were Barclays, Deutsche Bank, Royal Bank of Scotland, Societe Generale, Credit Agricole, HSBC, JPMorgan, UBS and Citigroup.

In a first cartel, which operated from 2005 to 2008 and was focused on euro-denominated derivatives, Deutsche Bank received the largest fine, of 468 million euros, followed by Societe Generale with 445 million euros. RBS was fined 131 million euros.

Barclays escaped a 690 million-euro fine because it was the bank that notified the Commission of the cartel's existence, while JPMorgan, HSBC and Credit Agricole have as yet not settled. JPMorgan and HSBC denied wrongdoing Wednesday, though JPMorgan settled with the Commission in a second cartel case.

"This is not the end of the story," Almunia said. He noted that further investigations are possible and the Commission is also probing a cartel it believes manipulated derivatives denominated in Swiss francs.

In a response to the fine, Deutsche Bank Chief Executive Juergen Fitschen referred to the euro cartel as a "legacy issue" caused by "past practices of individuals" at the bank. Fitschen has worked there since 1987 and became CEO in 2012.

He acknowledged participating in the cartel had been a "gross violation" of the bank's ethics. But he said the fine wouldn't hurt the bank's profits as it has already made provisions for the fines it deemed likely from regulators.

A second cartel fined by the Commission on Wednesday operated from 2007 to 2010 and focused on yen-based derivatives. The largest fines went to RBS and Deutsche Bank, 260 million euros each, while UBS received immunity from a staggering 2.5 billion-euro fine for revealing the existence of the cartel.

Societe Generale said its role was limited to a single trader who acted without knowledge of management. RBS, which has previously been fined by the U.S. and British authorities in rate-fixing cases, was more apologetic.

Chairman Philip Hampton said the bank's management became aware some of its employees had been helping fix rates in 2011 and has taken action to prevent it happening again. It has been keeping its team of interest rate traders separate from the rest of the company, monitoring its actions, and appointing a review board.

"The RBS board and new management team condemn the behavior of the individuals who were involved in these activities," Hampton said. "There is no place for it at RBS."

I guess they'll have to order Chinese food for delivery for lunch for a week to recoup their losses.

Not really, they can keep catering.  Business expense.

Another mis-selling fine, like PPI this is at the level of day-to-day banking:

QuoteLloyds Banking Group fined record £28m in new mis-selling scandal
Pressure on staff to get 'a grand in your hand' or face demotion led to bonus-induced selling frenzy, FCA says
Jill Treanor and Jennifer Rankin

A shocking catalogue of sales incentives for bankers at Lloyds Banking Group has been revealed by regulators after the bailed-out bank received a record £28m fine for "serious failings" in its bonuses schemes.

The 33% taxpayer-owned bank now faces a bill of at least £100m to compensate up to 700,000 customers of Lloyds, Halifax and Bank of Scotland who bought £2bn-worth of products such as share ISAs, illness or income cover between January 2010 and March 2012 in a bonus-induced selling frenzy by staff of the newly merged bank. In many instances the customers did not need the products but Lloyds paid bonuses to its staff, who faced demotion if they failed to hit targets, regardless. Staff were on variable salaries depending on how much they sold.

The sales practices of 420 advisers – some 12% of those employed – are the focus of any potential redress for customers.

The scale of the fine – a record for the Financial Conduct Authority for such conduct-related issues – could lead to bonuses for past and current directors being clawed back, including the current chief executive, António Horta-Osório, who was at the helm for 12 months before the bonus schemes were stopped.

Exposing the latest scandal for an industry already disgraced by the payment protection insurance scandal, Tracey McDermott, the FCA's director of enforcement and financial crime, said the fine had been increased by 10% because Lloyds failed to heed repeated warnings about sales practices and because it had been fined 10 years ago for poor sales incentives.

"Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first – but firms will never be able to do this if they incentivise their staff to do the opposite," said McDermott.

The damaging findings issued by the FCA show the pressure the staff were under to achieve sales, which in some instances allowed them to earn more than £70,000 a year, and to avoid being demoted. Examples are provided of Halifax staff earning more than £30,000 in a quarter and Bank of Scotland staff receiving more than £7,000 a month. Union officials at Unite called for all sales bonuses to be abolished.

Among the revelations are:

• A sales adviser who sold financial protection products to himself, his wife and a colleague in an attempt to avoid being demoted.

• A "grand in your hand" scheme for advisers at Halifax and Bank of Scotland to get a one-off payment of £1,000 for hitting sales targets.

• A "champagne bonus" for Lloyds TSB staff worth 35% of their monthly salary for meeting sales targets.

Technically the fine was levied in parts – £16.4m on Lloyds TSB and £11.6m on Bank of Scotland. All are part of the Lloyds Banking Group which was created in January 2009 when Lloyds TSB rescued HBOS – Halifax Bank of Scotland – at the height of the banking crisis with a £20bn taxpayer bailout.

Horta-Osório, who recently received a £2.3m share bonus because of the rise in the bank's share price since the government sold off the first of its stake, took the helm of Lloyds in March 2011. He brought in a new management team. Helen Weir, now the finance director of retailer John Lewis, was head of retail banking for much of the period of the bonus schemes.

A spokesman for Lloyds said the impact on bonuses for directors – past and present – would be considered at next month's remuneration committee. "The impact of the sales bonuses and potential redress will be considered at the January remuneration committee," the Lloyds spokesman said.

Lloyds said it had already embarked on a review to establish if compensation should be paid to customers. "We are already contacting customers, and will continue to contact potentially affected customers over the coming months. Customers do not need to take any action at this stage to be included in the review and they will be contacted in due course," the bank said.

It said the cost of the fine and any compensation would not have a "material impact on the group" which indicates the entire episode will cost less than £200m.

McDermott said the FCA had published a review of incentive schemes last year and that all firms needed to ensure they were not encouraging staff to sell products customers did not want. "The findings do not make pleasant reading. Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart. The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere."

Unions argued that they had campaigned against sales targets. Dominic Hook, Unite national officer, said: "Despite the countless reports and investigations into the conduct of the banks the industry clearly has not learned the lessons of the financial crisis nor heard the concerns of customers and staff in order to adequately change."

We could use some mis-spelling fines on Languish.

Quotenow faces a bill of at least £100m to compensate up to 700,000 customers

How positively punitive.