Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Lloyds hit with £217 million fine over Libor manipulation

Lloyds hit with £217 million fine over Libor manipulation

Lloyds Banking Group has been hit with a combined fine of £217.4 million by UK and US regulators for its role in the Libor manipulation scandal.

The Financial Conduct Authority fined Lloyds Bank and Bank of Scotland a combined £105 million, while the US Commodity Futures trading Commission levied a further $105 million (£61.8 million) and the US Department of Justice $86 million (£50.6 million).

The fine is the joint third highest ever levied by the regulator or its predecessor the Financial Services Authority, and the seventh penalty meted jointly with US regulators over ‘serious misconduct’ around Libor.

Lloyds’ fine compares to a £266.7 million penalty against Barclays and £360.4 million for Royal Bank of Scotland.

Lloyds chief executive Antonio Horta-Osario said: ‘The behaviours identified by these investigations are absolutely unacceptable. We take the findings of these investigations, which relate to issues from some years ago, extremely seriously. 

‘Together, the board and the group's management team have taken vigorous action over the last three years to prevent this kind of behaviour, through closing or reducing our legacy investment banking activities. 

‘In addition we have implemented a customer-focused, UK-centric strategy, changed our culture and values, improved systems and processes, and implemented more effective controls.’

A significant chunk of the UK-mandated fine, £70 million, was directly related to the banks' attempts to manipulate Libor to favourably impact liabilities related to the UK Special Liquidity Scheme (SLS) bailout fund.

FCA director of enforcement and financial crime Tracey McDermott said: ‘The firms were a significant beneficiary of financial assistance from the Bank of England through the SLS. Colluding to benefit the firms at the expense, ultimately, of the UK taxpayer was unacceptable. This falls well short of the standards the FCA and the market is entitled to expect from regulated firms.

‘The abuse of the SLS is a novel feature of this case but the underlying conduct and the underlying failings - to identify, mitigate and monitor for obvious risks - are not new. If trust in financial services is to be restored then market participants need to ensure they are learning the lessons from, and avoiding the mistakes of, their peers. Our enforcement actions are an important source of information to help them do this.’

The FCA said Lloyds’ failing related to the mispricing of Libor between May 2006 and June 2009, which saw it colluding with Rabobank to influence Yen Libor, while manipulating its sterling and dollar Libor submissions. The regulator said 16 individuals at the firm, seven of who were managers, were directly involved in or aware of the various forms of Libor manipulation.

Lloyds Banking Group chair Lord Blackwell said: ‘The board regards the actions of these individuals between 2006 and 2009 as completely unacceptable. Their behaviour involved a gross breach of trust and we condemn it without reservation. I have written to the governor of the Bank of England to make clear we have a common view on this. 

‘I am also convinced that it is entirely unrepresentative of the vast majority of our staff who are committed to delivering outstanding service and doing the right thing for customers, recognising that trust is at the core of our business.’

Lloyds settled the fine early to qualify for a 30% discount on its fine, which would otherwise have been £150 million.

The bank's share price was down 0.97% at 74.1p in mid afternoon trading.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Your Business: Cover Star Club

Profile: how career burnout led to a family office launch

Profile: how career burnout led to a family office launch

I was burnt-out from a career in finance and had no desire to come back, says the founder of Blu Family Office

Wealth Manager on Twitter