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‘Every little helps’: How Lloyds traders manipulated the markets

The FCA has revealed details of conversations between Lloyds and Bank of Scotland traders as they attempted to rig the Libor benchmark and artificially reduce fees paid to the Bank of England in the wake of the financial crisis.

Earlier today, the regulator announced a £105m fine for Lloyds Banking Group for manipulating benchmarks between 2006 and 2009.

Overall Lloyds has been fined a total of £218m, including a £62m penalty to the US Commodity Futures Trading Commission and £51m to the US Department of Justice.

In addition, the high-street bank has paid the Bank of England £7.76m in compensation after traders fixed the repo rate in order to artificially reduce fees for participating in Special Liquidity Scheme, designed to help struggling banks during the financial crisis.

The FCA’s final notice shows in July 2007 one Lloyds trader referred to the benefits of Libor manipulation and said: “Every little helps…it’s like Tescos”. A manager replied: “Absolutely, every little helps.”

Here, we look at the key findings in the FCA’s final notice.

“Forcing”

Details of Libor manipulation show how Lloyds traders tried to manipulate Libor to profit on derivative contracts known as “forward rate agreements”. 

According to the final notice, traders tried to “force up” Libor to make FRAs more profitable.

It did so by bidding “aggressively” in the cash market in an effort to force up other banks’ Libor submissions.

One broker said in a call: “You don’t want the market to know what you’re f****ng doing.”

In three separate “Libor forcing” instances the FCA says the bank made close to £1m on FRAs.

Libor

Traders at Lloyds and Bank of Scotland also worked together to fix Libor rates in the hope it would benefit their own money market positions.

After BoS ceased to be on the panel for Libor rate setting in February 2006, it submitted requests to Lloyds traders instead.

The FCA found five instances of this. One BoS trader is recorded as telling a Lloyds trader: “To be honest we should be coordinating the Libor inputs to suit the books.”

In another communication, a Lloyds trader told a broker: “I’ve got no fixing today. So I can do my Libors wherever I f****ng want to put them, mate.”

Repo rate

Traders at Lloyds were also found to have worked together in manipulating repo rate submissions.

The repo rate was used alongside Libor to calculate payments owed for using the Bank of England’s Special Liquidity Scheme.

The SLS allowed banks to swap mortgage-backed securities for UK Treasuries in an effort to boost their liquidity during the financial crisis.

Bank of Scotland and Lloyds traders worked together to influence the rate knowing that having two submissions on a panel of 12 gave it an increased chance of manipulating the rate in its favour.

On one occasion, a BoS manager said in an exchange with a Lloyds trader that he would raise a submission from 69 to 71, saying they would “put in 71, or whatever suits you…you don’t want to go too high because then it will set us out completely…While we have two votes we should use this to suit our advantage, you know what I mean?”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. The Famous Cash 28th July 2014 at 5:34 pm

    The only thing which surprises me is that some people are surprised at the corruption in the banking sector!

    Check out The People against Lloyds and TSB Facebook page!

  2. If they have recorded voices then surely the individual traders and managers can be identified ? Why are they then not being prosecuted ? These people make Arthur Daley look like a paragon of virtue. If I was to state what I realy thought of these individuals it would never be shown. They are beyond the pale.

  3. LloydsTSB ” For the Journey ” . . .a journey of deceit and depositors destruction . It is interesting LloydsTSB were major sponsors – of the Olympics – they are ” The Bankers to the FCA ( Gresham Street ) – yet work so unethically under the nose of Regulators and City Watch Dogs. Whilst we need to acknowledge Antonio Horta Ossario ( Who was not always n ” gardening leave ” ) as CEO and the last Peer who was a ” Chairman ” and the new Lord and Conservative sympathiser – are clearly, “Asleep on the Job “. At least – at last Mark Carney appears to have woken up to the situation, and despite so many alerts appears to be on the way to rectify – the unethical and criminal practices of these broken banks ( check LloydsTSB Sharia Law mortgage lending ? and how such loans operate ?).
    What is most frustrating is this has continued for such a long time – with a regular flow of ” Fines “, negotiated in the main. A cynical person might suspect these fines are used to cross subsidise the Government losses – or perhaps a more legalised “bung ” – to keep these destructive and criminal employees – out of the POKEY where they belong. There are clearly no proper records . . .there appears to be a Major Breach of Ethics . . . . .there are other irregularities . . . . that appear to be continuing . . . . . and NO ONE GOES TO JAIL ! Why is that ? Clearly the Chariman Win Bischoff of LloydsTSB and his pals in the conservative party . . .were surely fully aware of this . . . .and the latest Conservative ally Lord . . . .wots his name .. .will be ” Fully Alerted ” and we need to know whether he is working for conservative party funds or for an on behalf of the shareholders ? answers on a postcard to Dave Cameron – for prime ministers question time ?

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