The FCA has laid bare the full extent of attempts to rig Libor at inter-dealer brokerage Icap Europe after it was hit with £54.5m worth of global fines today.
The brokerage, whose chief executive is Conservative party donor Michael Spencer, was fined for colluding with UBS to fix Japanese Libor rates over many years.
The FCA found 330 written requests from UBS to Icap to manipulate Libor for the benefits of traders.
The final notice reveals the extent of rigging with one broker referring to himself as “Lord Libor”, while in other cases champagne and dinners out were used to lure brokers into rigging.
Libor is the most frequently used global benchmark for interest rates, and requires banks to make judgments about the rate at which it can borrow funds and contribute rate submissions every business day.
Libor is published for 10 currencies, but Japanese yen and US dollar Libor are widely used currencies, with three-month and six-month among the commonly used maturities.
Here we set out some of the examples cited by the FCA of Icap misconduct:
- 18 April 2007: “No more Mr Libor”
Broker 1 emailed broker 2 stating: “With [UBS] how much does [Trader A] 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.”
Broker 2 then requested “some form of performance bonus per quarter from your … bonus pool to me for the libor service.”
The next day broker 2 sent another email to Broker 1 threatening: “LIBORS NO MORE,” if he did not receive sufficient compensation.
Broker 2 added that: “As far as I was concerned [Trader A] was paying for the libor assist for my assistance” and that were he not to be compensated properly, there would be “no more Mr Libor.”
Broker 2 was seen as critical to the success of the scheme and UBS agreed to pay him £5,000 a quarter for “Libor services” or a “fixing service” bonus as a reward.
The bonus money came from UBS’s brokerage commission and was allocated through JPY Derivatives Desk’s bonus pool.
From June 2007 to September 2009, broker 2 received £50,000 in bonus payments, which the FCA says they all knew to be corrupt.
- 10 September 2007: “Give me your ‘wish list’”
A trader emailed an Icap broker and said he “need[ed] high at the start of oct” and thereafter he wanted the brokers to “push for lower fixes.”
Broker to trader: “gotcha … just give me a ‘wish list’ at the start of each day and I will compose a begging letter to [Broker 3] after lunch.”
- 21 September 2007: “Do your best to keep them low”
One broker asked another broker if he “could you do your best to hold these as low as possible please”.
“I realise the pressure is on the top side at the moment but if you should send them out lower than you reckon they should be it would be a great help … I [meaning Trader A] have a very large 6mos exposure especially.”
- 22 July 2009: “NIce knowing you have 3 top fixers”
When devising a complex scheme to change the Libor rate involving panel banks, brokers and traders, one Icap broker warned a trader that: “[I]f you drop your 6m dramatically on the 11th mate, it will look v fishy, especially if [Banks A and B] go with you. I’d be v careful how you play it, there might be cause for a drop as you cross into a new month but a couple of weeks in might get people questioning you.”
Trader to broker: “Don’t worry will stagger the drops[,] ie 5bp then 5bp. Us then [Panel Bank A] then [Panel Bank B] then us then [Panel Bank A] then [Panel Bank B].”
Broker to trader: “Great the plan is hatched and sounds sensible. He added he did not “want [the trader] getting into shit.” The next day the broker said to the trader: “Nice knowing you have the “3 top fixers all onside in the 6m it can really shift [the published LIBOR rates].”