25 Sep 2013

Icap fined £54m over Libor rigging

UK broker Icap is fined £54m by British and US regulators for its part in the long-running Libor rate-fixing scandal, with three of its traders charged with wire fraud by a New York court.

Icap is the first broking firm to be fined over the Libor scandal, following a £290m hit on Barclays, £940m for Swiss bank UBS and £391m for the Royal Bank of Scotland.

It centres on manipulation of the rates which govern the price of hundreds of trillions of pounds of loans and transactions around the world, including household mortgages.

The British Financial Conduct Authority (FCA) said the misconduct by London-based ICAP Europe Limited (IEL) involved a “significant number of brokers” including two managers between October 2006 and November 2010.

It involved brokers colluding with traders at UBS to manipulate Japanese yen Libor rates for the benefit of the traders.

One broker received corrupt bonus payments at the instigation of a manager for his help in the rate-rigging, the FCA said.

In a statement, Michael Spencer, group chief executive officer at ICAP and former Tory party treasurer, said: “We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate YEN Libor.

“Their conduct contravenes all that ICAP stands for.”

Mr Spencer added that none of the three individuals remained with the firm, and others who may have been involved were no longer at the company.

Tracey McDermott, FCA director of enforcement and financial crime, said: “The misconduct in relation to Libor has cast a shadow over the financial services industry.

‘A cavalier disregard’

“The findings we publish today illustrate, once again, individuals within the industry acting with a cavalier disregard both for regulatory obligations and the interests of the markets.

“IEL’s significant failings in culture and controls allowed that misconduct to flourish and fell far short of expectations.”

The FCA said the misconduct was widespread and UBS made at least 330 written requests to Icap brokers for “inappropriate submissions” in relation to the rates, as well as oral requests which cannot be counted precisely.

It said three brokers, including one manager, were “central to the collusion”, though at least seven other individuals including another manager, spanning three desks, also participated.

In Washington, the Commodity Futures Trading Commission (CFTC) said that ICAP brokers “knowingly disseminated false and misleading information” about yen borrowing rates to manipulate, at times successfully, the daily yen Libor rate.

‘Lord Libor and Mr Libor’

It said the brokers, one of whom was known as “Lord Libor” or “Mr Libor” did so to help a “highly valued client” in his “relentless attempts to manipulate yen Libor”.

David Meister, the CFTC’s director of enforcement, said: “ICAP and other interdealer brokers are expected to be honest middlemen.

“Here, certain ICAP brokers were anything but honest.

“They repeatedly abused their trusted role when they infected the financial markets with false information to aid their top client’s manipulation of Libor.

“As should be clear from today’s action, any market participant who seeks to undermine the integrity of a global benchmark interest rate must be held accountable.”

Maximum of 30 years in jail

Meanwhile the US Department of Justice charged former brokers Read, Wilkinson and Goodman with conspiracy to commit wire fraud and two counts of wire fraud in a criminal complaint unsealed in a Manhattan criminal court.

It said each face a maximum 30 years in jail on conviction.

Attorney General Eric Holder said: “By allegedly participating in a scheme to manipulate benchmark interest rates for financial gain, these defendants undermined the integrity of the global markets.

“They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility.”