Following Royal Bank of Scotland’s £390m fine for Libor manipulation today, the FSA and US regulators have published a string of emails and electronic conversations between RBS employees which show the extent of the misconduct.
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.
RBS’ Libor submissions determined the cost of transactions for its money market books. Strategies to profit from manipulating Libor included lending money at a high six-month Libor rate and borrowing it at a lower Libor rate in order to make a profit.
Examples of RBS misconduct:
August 2007: RBS yen traders’ discussion about how they were aware other banks, including UBS, were manipulating Libor
Senior Yen Trader: this libor setting is getting nutss
Bank A Trader: im puzzled as to why 3m libor fixing not coming off after the FED action
Bank B Trader: [UBS] is lending dolls through my currencies in 3 month do u see him doing the same in urs
Senior Yen Trader: yes[,] he always led usd in my mkt[,] the jpy libor is a cartel now
Senior Yen Trader: its just amazing how libor fixing can make you that much money
Senior Yen Trader: its a cartel now in london[.]
September 2009: An RBS primary submitter agrees to change the direction of Libor submissions
Yen Trader 1: high 3s and 6s please
Primary Submitter: ok
Yen Trader 1: can we lower our fixings today please [Primary Submitter]
Primary Submitter: make your mind up[,] haha , yes no probs
Yen Trader 1: im like a whores drawers
May 2009: Bloomberg chats reflecting attempts to manipulate Swiss Franc Libor
Swiss Franc Trader: [Primary Submitter] pls can we get super high 3m[,] super low 6m
Swiss Franc Trader: PRETTY PLEASE!
Primary Submitter: 41 & 51
Swiss Franc Trader: if u did that[,] i would lvoe [sic] u forever
Primary Submitter: 41 & 55 then …
Swiss Franc Trader: if u did that i would come over there and make love to you[,] your choice
Primary Submitter: 41+51 it is
Swiss Franc Trader: thouht [sic] so
Primary Submitter: so shallow
November 2010: Conversation where primary submitter pretends to refuse to move Libor over Bloomberg chat, then agrees via telephone
Senior Yen Trader: was wondering if it suits you guys on hiking up 1bp on the 6mth Libor in JPY … it will help our position tremendously
Primary Submitter: how you doing with all the volatilities these days? … to be honest happy with levels we see at the moment
Senior Yen Trader: ok no prob … wouldn’t want to cause any problem … thanks mate
Senior Yen Trader: Hello?
Primary Submitter: Morning, [Senior Yen Trader]? Hi, [Primary Submitter].
Senior Yen Trader: Yeah, how are you?
Primary Submitter: I’m pretty good sir. Very Good. We’re just not, we’re not allowed to have those conversations on [instant messages].
Senior Yen Trader: Oh, sorry about that. I didn’t know.
Primary Submitter: (laughter)
Senior Yen Trader: (laughter) Oh because of the, the BBA thing?
Primary Submitter: Yes, exactly.
Senior Yen Trader: Ah, ok ok.
Primary Submitter: So yeah, leave it with me, and uh, it won’t be a problem.
Senior Yen Trader: Ok, great.