This article is from the source 'independent' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.independent.co.uk/news/business/news/lloyds-to-pay-218-million-in-fines-over-libor-rigging-9633818.html

The article has changed 7 times. There is an RSS feed of changes available.

Version 0 Version 1
Lloyds to pay £218 million in fines over Libor rigging Lloyds to pay £218 million in fines over Libor rigging
(about 5 hours later)
Lloyds Banking Group has been fined £218 million after it admitted “shocking” rate rigging practices, including ripping off the Bank of England over its financial life support scheme. Lloyds Banking Group was hit with £217m in fines today after its traders manipulated interest rates to rip off the Bank of England on a taxpayer-backed scheme intended to keep their employer afloat.
The penalties from UK and US regulators covered the manipulation of the benchmark repo rate - used to calculate fees due to the Bank for its support in the financial crisis - as well as the interbank lending rate Libor. The manner in which traders bit the hand that fed them appeared to shock even regulators, who said the misconduct was unique among recent rate-fiddling scandals.
In a letter to Lloyds earlier this month, Bank of England governor Mark Carney said: "Such manipulation is highly reprehensible, clearly unlawful and may amount to criminal conduct on the part of the individuals involved." In one exchange discussing rate manipulation, a Lloyds trader wrote: “Every little helps. It’s like Tesco’s.”
Lloyds chairman Lord Blackwell replied: "This was truly shocking conduct, undertaken when the bank was on a lifeline of public support." Last night, Mark Carney, the Bank of England’s Governor, described the behaviour of the traders as “highly reprehensible and clearly unlawful” – particularly as Lloyds had been among the biggest beneficiaries of the Bank of England scheme they were manipulating.
Lloyds has now paid £7.8 million in compensation to the central bank after it admitted manipulating the repo rate to try to reduce these fees. In a letter to Lloyds’ chairman, Lord Blackwell, Mr Carney also warned the traders’ actions “may amount to criminal misconduct”,  and said the Prudential Regulation Authority could take further action.
It said those involved in the rigging practices had either left, been suspended, or were subject to disciplinary proceedings, and that it would consider "remuneration implications". Responding, Lord Blackwell accepted it was “truly shocking conduct, undertaken when the bank was on a lifeline of public support”.
This is likely to mean clawing back bonuses of those directly involved, which could even extend to others - including senior management - should this be merited. Lloyds was rescued by a £20.5bn bailout during the financial crisis. Taxpayers still hold a 25 per cent stake in the bank.
Lloyds becomes the seventh firm to be fined by the Financial Conduct Authority (FCA) for Libor-related misconduct but the regulator said the ripping off of the Bank of England was the first case of its kind. The Financial Conduct Authority (FCA) said two Lloyds traders, later helped out by two traders from the Bank of Scotland, which the bank bought during the financial crisis, had tried to fix a rate to which fees for participating in the Bank of England’s Special Liquidity Scheme were linked, known as the three-month repo rate. The scheme helped to rescue the industry during the financial crisis by providing it with £200bn in short-term loans underwritten by the taxpayer to keep banks afloat and ensure they could trade and lend to customers.
Britain's FCA fined Lloyds £105 million, including £70 million for its attempts to rig the Special Liquidity Scheme (SLS) - the taxpayer-backed scheme to support UK banks during the financial crisis. The FCA described the traders’ behaviour as “misconduct of a type that has not been seen in previous Libor cases”.
The rest of the fine related to the manipulation of Libor, the benchmark interest rate used in hundreds of trillions of dollars worth of loans and transactions from complex derivatives to mortgages. Regulators also said certain managers were directly involved in the affair, or at least knew about it, and “promoted a culture on the money-market desks where such misconduct was accepted”. Lloyds was further found to have played a role in the City network that attempted to manipulate various Libor interest rates to help traders’ bets.
Part of the Libor misconduct came after pressure from a manager over market perception of its financial stability during the financial crisis, the FCA found, as well as attempts to boost trading positions. Regulators today released a series of embarrassing email conversations linked to the manipulations. In one exchange, a Libor submitter from the Netherlands-based Rabobank, which has already been heavily fined, said: “Morning skip… my little… [racial epithet redacted] friend in Tokyo wants a high 1m fix from me today… am going to set .37 – just for your info sir”.
A trader quoted by the FCA said: "I've been pressured by senior management to bring my rates down into line with everyone else." A Lloyds yen submitter replied: “That suits mate as got some month end fixings so happy to ablige… rubbery jubbery :-O”.
Libor rigging also resulted in a £62 million pay-out to America's Commodity Futures Trading Commission and £52 million to the US Department of Justice. As a result of the misconduct, Lloyds will pay $105m (£62m) to the US Commodity Futures Trading Commission, and a further $86m to the US Department of Justice for manipulation of various Libor interest rates. A further £35m has been levied by the FCA for Libor manipulation, plus £70m for the attempt to duck Bank of England charges. Lloyds will also have to pay the Bank of England nearly £8m in compensation for lost fees.
The FCA fine relates to the behaviour of Lloyds TSB and Halifax Bank of Scotland, part of the same wider group and at the centre of the financial crisis. Lloyds Banking Group remains 25% owned by the taxpayer following its rescue. The fine represents the third-largest levied by a financial regulator in the UK. But  its impact may be limited because the City expects underlying profits of more than £3.5bn over just six months when the bank presents results for the first half of the year on Thursday.
Tracey McDermott, the FCA's director of enforcement and financial crime, said: "The firms were a significant beneficiary of financial assistance from the Bank of England through the SLS. And its shares actually edged up 0.03p to 74.84p by the day’s end, as City analysts described the Libor fine as “small beer” when set against the cost of payment-protection insurance mis-selling, for which Lloyds is expected to increase provisions to £10bn.
"Colluding to benefit the firms at the expense, ultimately, of the UK taxpayer was unacceptable." David Buik, a Panmure Gordon commentator, said: “I am amazed that someone has not yet gone to jail for some of these misdemeanours.”
The repo rate probe covered a period between April 2008 and September 2009, involving four individuals - a manager and a trader at each firm. The chairman of the Treasury Select Committee, Andrew Tyrie, said: “It was appalling behaviour like this that triggered the creation of the Parliamentary Commission on Banking Standards.”
Libor rigging took place between May 2006 and June 2009, with 16 individuals directly involved, seven of them managers - including one who was also involved in the repo misconduct. Lloyds’ chief executive, Antonio Horta-Osorio, said: “The behaviours identified by these investigations are absolutely unacceptable.
The FCA said: "At both firms there was a culture on the money market desks of seeking to take a financial advantage wherever possible." “We take the findings of these investigations, which relate to issues from some years ago, extremely seriously. Together, the board and the group’s management team have taken vigorous action over the last three years to prevent this kind of behaviour, through closing or reducing our legacy investment banking activities.”
In one exchange it published, a trader was quoted telling a manager: "every little helps... it's like Tescos."
The FCA did not find there was "deliberate misconduct" by the banks but found that because of poor culture, and weak systems and controls, they "failed to prevent the deliberate, reckless and frequently blatant actions of a number of their employees".
Lloyds said "The issues subject to the settlements were restricted to a specific area of the business and were not known about or condoned by the senior management of the group at that time.
"The individuals involved have either left the group, been suspended or are subject to disciplinary proceedings. The group's board will now consider all the remuneration implications and potential actions available to it."
Lord Blackwell said: "The board regards the actions of these individuals between 2006 and 2009 as completely unacceptable. Their behaviour involved a gross breach of trust and we condemn it without reservation."
Chief executive Antonio Horta-Osorio said: "The behaviours identified by these investigations are absolutely unacceptable. We take the findings of these investigations, which relate to issues from some years ago, extremely seriously.
"Together, the board and the group's management team have taken vigorous action over the last three years to prevent this kind of behaviour, through closing or reducing our legacy investment banking activities."
PA