Regulators fine Barclays £290m for fixing Libor

Barclays has been fined £290m after interest rate derivative traders supplied false information about the rate at which it borrowed money in the money markets.

Last week, the FSA fined Barclays £59.5m for manipulating the London Interbank Offered Rate and the Euro Interbank Offered Rate, while US regulators the US Commodity Futures Trading Commission and the US Department of Justice fined Barclays £230.5m for the same offences.

Libor is calculated every day from the submissions of major banks, stating what rate they believe they can borrow and lend money. Euribor is the European equivalent.

Barclays derivative traders stood to gain large sums of money based on daily Libor and Euribor rates and sought to make a profit and benefit Barclays’ trading positions.
Libor submissions were also reduced in part to avoid negative media speculation about the bank’s liquidity during the financial crisis.

The FSA’s final notice, published last week, shows between January 2005 and May 2009, derivatives traders made 173 attempts to influence US dollar Libor submissions.

At least 58 attempts were made to influence Euribor submissions between September 2005 and May 2009 and traders made 26 attempts to influence yen Libor submissions between August 2006 and June 2008.

At least 14 traders were involved, sometimes prompted by external traders seeking to influence what rates Barclays submitted.

Emails from Barclays traders to submitters show these attempts to influence the rates. In one exchange, the trader asked for the one and three-month Libor submissions to be “low”.

The submitter replied: “Done…for you, big boy.”

Chelsea Financial Services managing director Darius McDermott says: “Some of the banks will do anything to make money. This is just another incident in a long line of sorry tales.”

FSA acting director of enforcement and financial crime Tracey McDermott says: “Making submissions to try to benefit trading positions is wholly unacceptable.”

Barclays’ trader emails

May 27, 2005
Submitter:
“Hi all, just an FYI, I will be in noonish on Monday.”
Trader B: “Noonish? Who’s going to put my low fixings in? He he he.”
Submitter: “[X or Y] will be here if you have any requests for the fixings.”

March 13, 2006
Trader C asks submitter what level 3-month Libor would be set at.
Submitter: “I am going 90 altho 91 is what I should be posting.”
Trader C: “When I retire and write a book about this business your name will be written in golden letters.
Submitter: “I would prefer this not be in any book.”

April 7, 2006
Trader:
“If it’s not too late low 1m and 3m would be nice, but feel free to say “no”. Coffees will be coming your way either way, just to say thank you for your help in the past few weeks.”
Submitter: “Done… for you big boy.”

October 26, 2006
An external trader makes a request to Trader G for lower 3-month US dollar Libor submission. He said: “If it comes in unchanged I’m a dead man.” Trader G said he would “have a chat”. Barclays’ submission was then half a basis point lower the next day. The external trade thanked Trader G in an email. It said: “Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.”