The fine is the largest in the FSA’s history, and came alongside £230m worth of penalties from US regulators.
LIBOR – the London Interbank Offered Rate – is compiled by the British Bankers’ Association as a daily average of individual banks’ stated lending rates to other financial institutions.
The rates for one-month, three-month, six-month and one-year loans are then used as a benchmark for bank rates and financial instrument pricing across the world.
Contained within the FSA’s Final Notice to Barclays, a section entitled ‘inappropriate US dollar LIBOR and EURIBOR submissions made following requests from derivatives traders’ reveals numerous requests made to submitters.
The FSA has identified that at least 173 requests for US dollar LIBOR submissions were made to Barclays’ submitters between January 2005 and May 2009, including 11 requests based on communications with external traders.
At least 58 requests for EURIBOR submissions were made to the submitters between September 2005 and May 2009, with at least 26 requests for yen LIBOR submissions made between August 2006 and June 2009.
Here are some of the requests the FSA has made public.
On Friday, 10 March 2006, two US dollar derivatives traders made email requests for a low three month US dollar LIBOR submission for the coming Monday:
Trader C stated “We have an unbelievably large set on Monday […] We need a really low 3m fix, it could potentially cost a fortune. Would really appreciate any help”.
On Monday, 13 March 2006, the following email exchange took place:
Trader C: “The big day [has] arrived… My NYK are screaming at me about an unchanged 3m LIBOR. As always, any help wd be greatly appreciated. What do you think you’ll go for 3m?”
Submitter: “I am going 90 altho 91 is what I should be posting”.
Trader C: “[…] when I retire and write a book about this business your name will be written in golden letters […]”.
Submitter: “I would prefer this [to] not be in any book!”
On Friday 7 April 2006, Trader C requested low one month and three month US dollar LIBOR submissions (shortly before the submissions were due to be made):
“If it’s not too late low 1m and 3m would be nice, but please feel free to say “no”… Coffees will be coming your way either way, just to say thank you for your help in the past few weeks”.
A submitter responded “Done…for you big boy”.
On Thursday 14 December 2006, Trader F emailed a submitter, requesting a low three month US dollar LIBOR submission for the following Monday, 18 December 2006:
“For Monday we are very long 3m cash here in NY and would like the setting to be set as low as possible…thanks”.
The submitter instructed another submitter to accommodate the request; “You heard the man” and confirmed to Trader F “[X] will take notice of what you say about a low 3 month”.
External traders also attempted to get Barclays to submit lower LIBOR rates:
On Thursday 26 October 2006, an external trader made a request for a lower three month US dollar LIBOR submission.
The external trader stated in an email to Trader G at Barclays “If it comes in unchanged I’m a dead man”. Trader G responded that he would “have a chat”.
Barclays’ submission on that day for three month US dollar LIBOR was half a basis point lower than the day before, rather than being unchanged.
The external trader thanked Trader G for Barclays’ LIBOR submission later that day: “Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger”.
