Barclays Fines Staff For LIBOR Fraud

Barclays will impose £450M of financial penalties on its staff for rigging LIBOR.

Sky News reports that Barclays will disclose details in its forthcoming annual report. The "fines" will be levied against the "variable pay", ie bonuses and deferred share awards of the staff.

However, it should be noted that Barclays will still award £1.8BN in bonuses to its staff.

LIBOR Still Rigged?

It seems that LIBOR is still rigged.

RBS Does A Deal With The DoJ

The Royal Bank of Scotland (RBS) has done a deal with the US Department of Justice (DoJ) over its involvement in the LIBOR scandal.

Sky reports that RBS' UK subsidiary has signed a two-year deferred prosecution agreement with the DoJ, as part of a package of measures that will include almost £400M in fines.

This means that if RBS commits any form of criminal offence during the two-year period, it could find itself excluded from the US market.

Additionally, 21 RBS employees have either left or have been disciplined as a result of Libor-related misconduct.

John Hourican, head of RBS's investment bank, will step down and forfeit about £4M in deferred share awards despite having had no involvement in or knowledge of the malpractice.

RBS will make a statement on the matter at 13:00 today.

Happy Bonus Season!

As a bleak and gloomy January draws to a close, the banksters are looking forward to awarding themselves some fat bonuses for all their "hard work" last year.

Sadly for the banksters not everyone is happy at the prospect of their self awarded largess. Step forward Unite which has demanded a meeting with UK Financial Investments Ltd (UKFI), which manages the government's (ie the taxpayer's) investments in RBS, Lloyds and UK Asset Resolution, over RBS's expected bonus payout of £250M.

As if things were not already bad enough for RBS, the Wall Street Journal reports US authorities are pushing for a settlement of LIBOR allegations that would result in the bank not only paying a fine of £500M, but also pleading guilty to criminal charges. Barclays and UBS got away with criminal charges, because they co-operated with the authorities.

RBS executives don't want to plead guilty because they fear that it will cause clients to cut off activity with the bank, and that it could increase exposure to ever more litigation.

Maybe then they should hold back on paying out a bonuses this year, lest the money be needed to pay for ongoing litigation?

Diamond Geezer In The News Again

The Telegraph reports that some of Barclays’ most senior executives, including former chief executives Bob Diamond and John Varley and current head of investment banking Rich Ricci, are among 104 people who unsuccessfully attempted to keep their names private ahead of the UK’s first trial related to the manipulation of Libor.

The list of 104 individuals comes from a case brought by Guardian Care Homes, which is seeking about £38M in damages from Barclays over interest rate swaps it claims it was mis-sold by the bank.

Guardian Care Homes says that the swap product it was sold was tied to Libor, which it argues was set dishonestly.

Barclays was ordered to give lawyers working for Guardian Care Homes the identities and emails of staff that it passed to regulators investigating the manipulation of the key interest rate.

Why LIBOR Matters

As per Max Keiser:

"LIBOR and other mrk riggers have just dropped UK 10-yrborrowing costs below 2%. Each £ saved in interest loses 2 £'s from pensions/savers."

In other words the LIBOR riggers profited at the expense of the rest of us!

UBS Fined $1.5BN

Last Friday I wrote that UBS was to be fined $1Bn for its role in the LIBOR rate fixing scandal.

I was wrong, UBS has in fact been fined $1.5BN.

Mea culpa!

UBS $1BN LIBOR Settlement

UBS is, according to the Telegraph, close to agreeing a settlement with UK and US regulators on LIBOR rigging.

The bank is expected to announce next week that it has reached a combined $1BN deal with US and British authorities to settle an investigation into the role it is alleged to have played in rigging global borrowing rates.

To put the $1BN into context, LIBOR is the basis for $800 TRILLION of financial products. The banks that participated in its rigging would have made billions out of this over the years.

Additionally, UBS's bonus pool was $2.79BN in 2011.

Therefore shed no tears for them!

Allegations of Gas Market Rigging Akin To LIBOR

The FSA and Ofgem are looking into allegations that some of the UK's largest utilities have manipulated the UK physical natural gas markets.

Seth Freedman, a whistleblower, told them that he saw evidence that wholesale gas prices, used as the basis for domestic energy bills, were manipulated by some of the big power companies.

Mr Freedman, who worked at ICIS Heren (a firm which reports gas prices), said he saw what he took to be suspect trading on September 28 (the end of the gas industry’s financial year).

The fact that gas is traded like all other commodities makes it susceptible to speculation.

In the event that Mr Freedman's allegations are proven to be true, then this would be a scandal equivalent to the LIBOR rigging by the banks.

You can almost hear the lawyers rubbing their hands with glee at the thought of the lawsuits that are going to come from this.

UBS Redundancies Smokescreen

Whilst UBS is enveloped by the smokescreen of publicity derived from its mass culling (and handling of that mass culling) of staff today, it seems to have been a "good" day for it to also let the world know that it is under investigation in Singapore, along with other banks, for possible manipulation of Libor and other benchmark rates.

As per Reuters:

"These investigations focus on whether there were improper attempts by UBS (among others), either acting on our own or together with others, to manipulate LIBOR and other benchmark rates at certain times."

 

Liborgate

Liborgate, despite the brief interlude provided by the chaff from the DFS over Standard Chartered, rumbles on.

The BBC reports that seven banks (HSBC, Royal Bank of Scotland Barclays, Citigroup, Deutsche Bank, JPMorgan and UBS), are to be questioned in the US for alleged Libor manipulation.

The US authorities will look to see if there is sufficient evidence to support a criminal prosecution.

The coming weeks will see much behind the scenes haggling between the banks, the regulatory authorities and governments, in order to avoid this going to court.

Scrap Libor

Martin Wheatley has called for Libor to be scrapped, and for the fictitious Libor rates be replaced with "reality".

What an excellent recommendation!

Read his full report below:

Secret Bankers' Meeting

Apparently, last Tuesday, there was a secret meeting of the CEO's and Chairmen of some the UK's leading banks.

The purpose of the meeting was to address the reputational damage from the industry's ongoing spate of scandals.

Mark Kleinman of Sky News reports that the meeting at HSBC's head office discussed Liborgate, as well as the payment protection insurance and interest rate swaps mis-selling.

It is regrettable that it has taken the banks so long to start to try to address issues that have been in the public domain, and the source of much public contempt, for such a long period of time.

The meeting also discussed the appointment of a successor (an outsider) to Marcus Agius as chairman of the British Bankers' Association (BBA).

Given the BBA's dismal reputation it would be better that they simply shut it down and set a new organisation up.

The BBA Tries To Rewrite History

Zero Hedge have revealed that the hopeless, hapless and despised British Bankers' Association (BBA) has attempted to rewrite history, and is trying to pretend that it had no regulatory role wrt Libor.

Specifically, as per Zero Hedge, here is an extract of the BBA's current governance documentation:

"There is a named individual at each bank responsible for submitting the daily bbalibor rates to Thomson Reuters and this will be the person responsible for the bank's cash - usually their title is 'treasurer' or similar. There is written guidance on what information that person should take into account when calculating that day's rates for his or her bank. As all contributor banks are regulated, they are responsible to their regulators, rather than BBA LIBOR Ltd. or the FX&MM Committee, for maintaining appropriate procedures for contributing, including the maintenance of internal chinese walls."

This is the "same" paragraph a few weeks ago:

"BBA LIBOR Ltd. receives the fixings and underlying contributor data at the same time as all other live data recipients and monitors all submissions into the fixing process. Any anomalous rates are queried with the submitting bank, and a log of these queries is kept and given to the FX&MM Committee on a periodic basis, who may choose at their discretion to follow up these queries in line with established governance and scrutiny procedures."

Now that the arrest warrants are being prepared, the BBA is doing everything it can to distance itself from Liborgate.

Too little too late!

Bank of England Releases Libor Emails

The Bank of England has released further information and correspondence in relation to the BBA Libor Review in 2008.

As per the Bank of England's website:

"At the hearing on Tuesday 17 July, the Treasury Committee requested papers relevant to the Bank of England’s interaction with the US Federal Reserve and with the British Bankers’ Association (BBA) Libor Review in 2008. To allow the Treasury Committee to see the full context, this submission contains all papers relevant to the BBA Review. It provides a brief commentary and timeline of the events around the BBA Review in 2008, together with the supporting documents.

In 2008, the Bank of England worked closely with the Federal Reserve Bank of New York (FRBNY) and the Financial Services Authority to input into the BBA Review of the Libor system.  The Bank of England and other central banks were concerned to influence the outcome of the BBA Review. 

Because the Libor system was, and is, a private sector arrangement and was not subject to financial regulation, it was not appropriate for the public authorities to endorse or determine the outcome of the BBA Review. When the amended proposals were adopted in December 2008, the Bank was not aware of any dissenting views expressed by the official or private sectors.

In reading these documents, it is important to distinguish between three issues. First, allegations of wrongful behaviour by Libor panel banks. Second, concerns about the operation of the Libor process in times of market stress. Third, the need for any system based on self-reporting to be alert to the possibility of “accidental or deliberate misreporting”, as referred to in the Geithner memorandum.

The Geithner memorandum contains no allegation of wrongful behaviour and relates to the second and third of these issues. At no point did the FRBNY draw the attention of the Bank to evidence of wrongdoing in the setting of BBA Libor. Indeed, with the exception of the memorandum sent by Mr Geithner to the Bank in early June 2008, none of the other documents published on 13 June 2012 by the FRBNY had been shared with the Bank.

The attached timeline gives a detailed account of the interaction between the Bank and the Federal Reserve and the BBA.  The broad outline of events is as follows:

• From May 2008, the Bank of England encourages the BBA to conduct a global review of Libor and banks to engage with the review at a sufficiently senior level.  It also begins to discuss these issues with the FRBNY.

• The Bank considers the points in the Geithner memorandum and ensures that those points are taken on by the BBA.

•  The Bank and the Federal Reserve work closely together behind the scenes to influence the consultation paper issued by the BBA on 10 June 2008.

• The Bank also continues to work on influencing the outcomes after the consultation paper is published until the BBA publishes its final report on 18 December 2008." 

The relevant documents can be viewed here.

King Denies Fed Warning

In the understatement of the decade, Mervyn King (Governor of The Bank of England) has told the Treasury Committee that there needs to be change of culture at Barclays.

"Barclays has to create a new bank with a new culture to take it forward."

He also denied that the Fed had warned the Bank of England that Libor was being manipulated:

"If the Fed had regulatory concerns they would have shared that with the regulator, [not the Bank of England].

They didn't pass any information to us that Libor was being manipulated.

The Fed could have shared that with us and they did not, all we would have done was pass it on. The Fed is a regulator, we were not; the Fed asked us for advice on how to interact with the BBA."

This denial is rather odd given the following:

"Writing to the head of the Bank of England, among others, Geithner made six recommendations, which included eliminating incentives that could encourage banks to manipulate the rate and establishing a “credible reporting procedure.” 

Not least the fact that King responded and thanked him for his recommendations.

Notwithstanding that apparent conflict between what King said and reality, his statement that the Bank of England was not the regulator may well be technically correct given the appalling tripartite system set up by Brown. However, it surely had more than a passing interest in what was going on with the banking system and, now that it will have "beefed up" powers, most certainly has an even greater "interest".

Del Missier Drops Diamond In It

As per Robert Peston:

"Del Missier is very clear he remembers Diamond telling him Bank of England wanted Barclays to understate submission to LIBOR committees."

Jerry del Missier has dropped Bob Diamond well and truly in it!

LIEBORGATE The Oncoming Storm

The roll of distant thunder coming across the Atlantic has hit the shores of Britain.

The Washington Post reports that the Bank of England was warned by Timothy Geithner (then President of the Federal reserve bank of New York) in 2008 that Libor needed to be fixed:

"While president of the Federal Reserve Bank of New York, Timothy F. Geithner pressed British regulators to reform the way a critical global benchmark called the London interbank offered rate, or Libor, is calculated, according to a June 1, 2008, e-mail obtained by The Washington Post.

Writing to the head of the Bank of England, among others, Geithner made six recommendations, which included eliminating incentives that could encourage banks to manipulate the rate and establishing a “credible reporting procedure.”

'We would welcome a chance to discuss these and would be grateful if you would give us some sense of what changes are possible,' Geithner wrote."

Here is a link to a copy of the email and the Bak of England's response: Geithner email.

The New York Fed is set to release a treasure trove of documents Friday morning (EST) detailing its response to concerns raised as early as 2007 about Libor, which helps set the standard for $10 trillion worth of corporate bonds, credit cards, mortgages and other loans around the world.

The storm is coming, the Bank of England and others had best batten down the hatches!

Bob Diamond To Receive "Only" £2M

"Good" news everybody, Barclays has agreed a payoff for Bob Diamond.

Diamond has agreed to waive his share awards (worth around £20M) and will walk away with "only" £2M, being 12 months' salary, pension allowance and other benefits.

Diamond is estimated to have earned well over £100m during his career at Barclays.

Here is a statement released by Barclays to confirm Bob Diamond's pay-off arrangements:

"Mr Diamond has voluntarily offered to waive all of his unvested deferred bonus awards and long term incentive share awards.This is in addition to his previous decision to forgo any consideration for an annual bonus this year. The Board has accepted this offer, and all of Mr Diamond's outstanding unvested deferred bonus awards and long-term incentives will lapse, with no compensation made in respect of the lapsed awards.

The Board has asked Mr Diamond to support the transition to the new Chief Executive as necessary, and he has agreed. Consistent with his contract of employment, Mr Diamond will receive up to 12 months' salary, pension allowance and other benefits; and he has agreed to forgo his contractual entitlement to tax equalisation going forward. The Board has agreed with Mr Diamond that he will not receive any future bonus or incentive awards; nor will he receive any further compensation payment in connection with the termination of his employment.

Marcus Agius, Chairman, said: "The Board deeply regrets the circumstances that led to Bob resigning his positions at Barclays. Despite having no personal culpability, he recognises more than anyone the negative attention that they have generated and has taken characteristically strong action to address that. These circumstances do not detract in any way from the tremendous legacy that Bob has left at Barclays, and his actions are clear indications of his commitment to the institution to which he has contributed so much."

Bob Diamond said: "For the past 16 years I've had the honour of working at Barclays. The wrongful actions of a relative few should not detract from the outstanding work that Barclays employees carry out each day on behalf of clients and customers around the world. It is my hope that my decision to step down and today's agreement on my remuneration will help close this chapter and allow Barclays to move forward and prosper."

In other news, Farepak savers after a six year wait have been advised that they will receive 50p for every £1 they saved with the company.

The Diamond and Tucker Emails Obtained By Sky