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FCA fines Rabobank £105m for Libor failings
by Danielle Levy on Oct 29, 2013 at 13:03
The Financial Conduct Authority (FCA) has fined Coöperatieve Centrale Raiffeisen-Boerenleenbank (Rabobank) for what it has described as 'serious, prolonged and widespread misconduct' relating to the London Interbank Offered Rate (Libor).
The £105 million fine is the third highest ever imposed by the FCA or its predecessor, the Financial Services Authority, and the fifth penalty for Libor-related failures.It follows significant fines for Libor misconduct for Barclays and UBS. Back in December of last year UBS agreed to pay $1.5 billion (£940 million) to US, UK and Swiss regulators for attempting to manipulate the Libor inter-bank lending rate.
The City watchdog said Rabobank had cooperated with the investigation and agreed to settle early, qualifying for a 30% discount on its fine, otherwise it would have been £150 million.The regulator said Rabobank’s poor internal controls encouraged collusion between traders and Libor submitters and allowed systematic attempts at benchmark manipulation. Rabobank did not fully address these failings until August 2012, despite assuring the FCA in March 2011 that suitable arrangements were in place.
The FCA found over 500 instances of attempted Libor manipulation, directly or indirectly involving at least nine managers and 19 other individuals based across the world. It said at least one manager was actively involved in attempted manipulation and facilitated a culture where this practice appeared to be accepted.
Tracey McDermott (pictured), the FCA’s director of enforcement and financial crime said: 'Rabobank’s misconduct is among the most serious we have identified on Libor. Traders and submitters treated Libor submissions as a potential way to make money, with no regard for the integrity of the market. This is unacceptable.
'Rabobank’s flawed assurances and failure to get a grip on what was going on in its business were extremely disappointing. Firms should be in no doubt that the spotlight will remain on wholesale conduct and we will hold them to account if they fail to meet our standards.'
The FCA said that between May 2005 and January 2011 Rabobank allowed derivatives and money market traders to influence others at the bank to make Libor submissions that benefitted trading positions linked to sterling, US dollar (USD) and the Japanese yen (JPY) Libor. It added that the bank. It found instances of collusion with individuals at other Libor panel banks and interdealer firms to influence JPY and USD Libor submissions made by other panel banks, alongside collusion which affected Rabobank's JPY Libor submission. This meant the Libor submissions from Rabobank and other panel banks, didn’t fairly reflect the cost of inter-bank borrowing.
In April 2009, the FCA said a JPY Libor submitter informed Rabobank’s internal audit group that his submissions were based on direct instructions from traders, yet the bank failed to address the issue.
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