The Commodity Futures Trading Commission, the U.S. Department of Justice, and U.K.’s Financial Conduct Authority are ordering Lloyds Banking Group PLC (LLOY) to pay $370 million in fines for trying to rig benchmark interest rates, including the rate that influenced how much the bank paid to be able to get emergency taxpayer funding during the financial crisis.
The regulators content that Lloyds attempted to manipulate the rates to enhance its financial position. Its HBOS unit is accused of attempting to lowball Libor submissions to make it seem as if it was in solid financial health when Lloyds was acquiring it.
Lloyds also purportedly tried to rig the U.S. dollar Libor rate, conspired with Rabobank NV to affect the Japanese yen Libor rate, and manipulated the BBA Repo Rate. The benchmark, which is now defunct, played a part in assessing fees that banks paid to the Bank of England to get U.K. government bonds in exchange for illiquid mortgage-backed securities. Lloyds says it repaid $13.6 million to the bank for what it didn’t pay to the “Special Liquidity Scheme,” which is the name of the taxpayer-backed facility.
In a letter earlier this month, Bank of England Governor Mark Carney called the manipulation by Lloyds “reprehensible, clearly unlawful.” He noted that the conduct might have even been criminal.
In a statement, the FCA said that the misconduct at Lloyd involved not just low-level employees but also managers who either knew of were directly involved in LIBOR manipulation. Issuing its own statement, Lloyds condemned those responsible and apologized for their actions. Its chairman, Norman Blackwell, said the traders’ behavior was “truly shocking.”
Lloyds’s deal with the DOJ is a deferred prosecution agreement. As part of that resolution, criminal information charging the bank with wire fraud will be submitted today but would be dropped as long as Lloyds complies with all of the terms, including admitting responsibility.
Lloyds Pays $370 Million to Settle Rate Probe, The Wall Street Journal, July 28, 2014
Lloyds Attacked by Carney as Bank Fined for Libor-Rigging, Bloomberg, July 28, 2014
More Blog Posts:
Lloyds Could Pay Over $500M To Settle LIBOR Rigging Allegations, Institutional Investor Securities Blog, July 25, 2014
Barclays Settles Two Libor-Related Securities Cases, Institutional Investor Securities Blog, April 16, 2014
Lloyds, Barclays, to Set Aside Hundreds of Millions of Dollars for Allegedly Mis-Selling to Victims, Stockbroker Fraud Blog, August 27, 2013