banking

LIBOR investigation ends with spectacular fizzle

the-uses-of-libor-and-the-victims-of-its-manipulation-a-primer

Banker: “can we have a high 6mth libor today pls gezzer?”  LIBOR Submitter, “sure dude, where wld you like it mate ?”

That’s just one of countless egregious examples of LIBOR manipulation. Yet, after countless months of investigation and worldwide scandal, the controversial LIBOR manipulation case has ended this morning with a fine but no jail time – a spectacular fizzle:

Moments ago the NY Department for Financial Services announced that Deutsche Bank would pay $2.5 billion “in connection with the manipulation of the benchmark interest rates, including the London Interbank Offered Bank (“LIBOR”), the Euro Interbank Offered Rate (“EURIBOR”) and Euroyen Tokyo Interbank Offered Rate (“TIBOR”) (collectively, “IBOR”).”

* * *

Most importantly for DB’s 98,138 employees is that while DB will “terminate and ban individual employees who engaged in misconduct” nobody will go to jail. Again.

Why, you ask, do I think their employees should have gone to jail, or better yet, had all their assets seized and their operations liquidated to pay restitution for the trillions they cost individual investors, pensioners, etc. for losses they suffered in their 401ks?

libor-works

The following is just one of the egregious exchanges the department of finance uncovered in their months long investigation:

From approximately 2005 through 2009, certain Deutsche Bank traders frequently requested that certain submitters submit rate contributions that would benefit the traders’ trading positions, rather than the rates that complied with the IBOR definitions. For example, on February 21, 2005, a trader requested of another trader who performed submitter duties on a back-up basis, “can we have a high 6mth libor today pls gezzer?”  The trader/submitter agreed, “sure dude, where wld you like it mate ?”  The trader replied, “think it shud be 095?”  The trader/submitter replied, “cool, was going 9, so 9.5 it is.”  The trader joked, “super – don’t get that level of flexibility when [the usual submitter] is in the chair fyg!” Similarly, on December 29, 2006, a trader wrote to a submitter, “Come on 32 on 1. Mth… Cu my frd.”  The submitter agreed, “ok will try to give you a belated Christmas present…!”

Deutsche Bank also communicated and coordinated with employees of other banks and financial institutions regarding their respective rate contributions in advance of an IBOR submission. On September 7, 2006, a London desk head attempted to obtain a low EURIBOR submission from an external banker at Barclays, “I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…”  The external banker replied, “I told them 1 m up is that right?”  The London desk head continued, “please pal, insist as much as you can… my treasury is taking it to the sky… we have to counter balance it… I’m beggin u… can u beg the [a panel bank] guy as well?”   The external banker agreed, “ok, I’m telling him.”

Many more can be found in this morning’s mind numbing press release.

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