FT: “At the height of the financial crisis, two Lloyds Bank traders artificially inflated a key bank lending rate to cut fees to the Bank of England’s taxpayer-funded scheme put in place to support the fragile UK banking system.
“That revelation marks the first time that authorities have alleged that taxpayers – rather than derivatives traders and other financial counterparties – were directly harmed by the global rating rigging scandal that has engulfed a dozen banks and brokers on three continents.
Essentially, the two traders pushed up the rate for three-month “repo” transactions in order to cut the fees their bank owed to the Bank of England for participating in the UK’s Special Liquidity Scheme (SLS).
….The UK bank is the seventh financial institution to settle to date with US and UK authorities over allegations that traders manipulated or sought to manipulate Libor and other interbank lending rates.
Lloyds admitted criminal wrongdoing as part of a deferred prosecution agreement with the US Department of Justice, which has charged five major financial institutions and nine individuals with criminal violations.
….The individuals involved derived no personal benefit from the manipulation, according to someone close to Lloyds, but their activities reduced the fees payable to the BoE for all the banks that participated in the SLS.
….BoE governor Mark Carney wrote in a letter to Lloyds that “such manipulation is highly reprehensible, clearly unlawful and may amount to criminal conduct on the part of the individuals involved”.
A spokeswoman for the UK Serious Fraud Office said the office was aware of the allegations involving the SLS. She said the SFO’s criminal probe into Libor and other rate-fixing continues but declined to comment further.
….At times, Lloyds traders conspired with traders at Rabobank to manipulate the yen Libor rate. Last year Rabobank paid $1bn and admitted that 30 employees around the globe manipulated several different interest rates, Euribor and Libor for the US dollar, yen, and pound sterling.
According to authorities, on July 28, 2006, a Rabobank submitter wrote to a Lloyds submitter, “morning skipper…..will be setting an obscenely high 1m[onth] again today . . . poses 38 just fyi.”
“Oh dear. my poor customers . . . hehehe! manual input libors again today then!!!!,” the Yen Libor submitter replied. Both banks’ submitted one basis point higher to 0.38.”
Future Today
