US Regulator Sues Major Banks Over Libor Manipulation

[rhoenix]

The US Federal Deposit Insurance Corporation sued HSBC, Citigroup, Deutsche Bank and 12 other global banking heavyweights on Friday for manipulating the Libor benchmark interest rate.

The manipulation caused "substantial losses" to 38 US banks that were shut down due to insolvency during and after the 2008 financial crisis, according to the FDIC.

The regulator said the accused institutions cheated the closed banks in US dollar-based Libor swaps and other agreements through the manipulation of the rate between 2007 and 2011.

Libor, or the London Interbank Offered Rate, is used as a reference for some $350 trillion worth of financial contracts worldwide, from corporate loans to financial swap contracts.

"The panel bank defendants fraudulently and collusively suppressed USD Libor, and they did so to their advantage," the FDIC's filing said.

The banks named are, or were, participants in setting the daily Libor rate.

They include Bank of America, Citigroup and JPMorgan Chase of the United States, Germany's Deutsche Bank and WestLB, Britain's HSBC, Barclays and Lloyds banks, Japan's Norinchukin Bank and Bank of Tokyo-Mitsubishi, Credit Suisse and UBS of Switzerland, Royal Bank of Scotland, Royal Bank of Canada and Rabobank of the Netherlands.

Several of the banks have already paid substantial fines to regulators and judicial authorities in the United States and Europe for participating in rate-fixing.

Also sued was the British Bankers' Association, which at the time oversaw the banks' daily fixing of Libor.

"BBA participated in the alleged scheme to protect the revenue stream it generated from selling Libor licenses and to appease the Panel Bank Defendants that were members of the BBA," the filing said.

The FDIC said it was seeking full damages for losses incurred by the closed banks, punitive damages and damages for violating US antitrust statutes.

The US and British central banks began investigating rigging of the Libor rate in the middle of the financial crisis in 2008.

But those probes only bore concrete fruit in 2012, when Barclays bank was the first to settle allegation and was force to pay fines of $450 million.

Since then, numerous banks have been fined from New York to Tokyo. UBS was fined $1.5 billion by US, British and Swiss regulators, and RBS paid out more than $600 million.

The scandal has also spread to other areas of London-focused trading, with regulators and justice officials around the world now focusing on foreign exchange rate manipulation.

The Hong Kong Monetary Authority separately concluded that UBS had attempted to rig the local benchmark rate Hibor.

The HKMA said it found about 100 internal chat messages sent during 2006 to 2009 that "contained change requests by several UBS traders to the UBS Hibor submitter with a view to rigging the Hibor."

Well, now - this is worthy of getting popcorn to watch.

[frigidmagi]

BBC

Additional information.

Also Hong Kong's government is also accusing larger banks of attempting to fix the game.

Traders at Swiss bank UBS made around 100 attempts to rig a key lending rate called Hibor, the region's financial regulator has said.

The Hong Kong Monetary Authority (HKMA) found internal chat messages which contained "change requests" between 2006 and 2009.

The requests were made "with a view to rigging the Hibor fixing" HKMA said.

But the regulator said it found no evidence of collusion with other banks in the region to rig the rate.

Hibor stands for Hong Kong Interbank Offered Rate and is the rate at which banks lend to each other.

The regulator found "material weaknesses" in UBS's internal controls and governance in managing the Hibor submission process and "in other areas", it said in a statement.

HKMA said that it was "unacceptable" that UBS had failed to report the misconduct to authorities.

In a statement UBS said: "We are pleased that the investigation of the HKMA returned the same results as our own internal investigation - no collusion among banks and no noticeable impact on the fixing of Hibor from any conduct occurring during the period in question.

"We have not been part of the HIibor fixing panel since 2010 and have taken appropriate steps to incorporate the HKMA's suggested improvements into our operations."

However, the regulator said it was still considering whether further sanctions would be required.

Wider investigation
The investigation is the latest in a series of scandals relating to attempts to rig global interbank lending rates to have emerged since the summer of 2012 and which stretch back almost a decade.

In June 2012 Britain's Barclays Bank was fined a record £290m by both UK and US financial regulators after it admitted to attempting to rig the London interbank offered rate (Libor), ultimately leading to the resignations of the bank's chief executive Bob Diamond and its chairman Marcus Agius.

At the end of the same year UBS agreed to pay £900m to settle charges that it attempted to rig Libor, providing the first evidence the practice was more widepsread than was previously known.

UBS has since escaped regulatory action for helping European financial regulators in their investigation of manipulation of the Euribor - Europe's equivalent to Libor.