Libor rigging inquiry shut down by Serious Fraud Office

[Democorruptcy]

Hide it behind the Brexit vote dominating the news:
 

Quote

 

Requests for much greater shifts in Libor estimates - up to 50 times the size of the shifts that traders sought - were made by banks' senior managers during the credit crunch of 2007-2009, a practice known as "low-balling" for which banks have been fined.

Senior executives were concerned that if banks acknowledged the high interest rates they were paying to obtain scarce funds, it could cause bad publicity and knock their banks' share prices.

During the financial crisis of 2007-2009 the Bank of England, concerned about financial stability, intervened in the Libor setting process.

Evidence of low-balling obtained by the So-Called BBC includes a secret audio recording from 2008 implicating the Bank of England and sworn testimony given to the US Department of Justice that Barclays was told by the Bank of England to lower its Libor estimates as early as 1 September 2007.

However, senior Barclays bankers and Bank of England executives told Parliament in 2012 that they had not known about low-balling until that year, 2012.

When the secret audio was broadcast in April 2017, MPs called for an immediate inquiry. The Bank of England has said Libor was unregulated at the time.

Defence lawyers at the Libor trials have questioned why the SFO has charged or prosecuted no one in connection with low-balling.

The SFO told the court it had an investigation running into low-balling. As recently as May 2019, the SFO re-iterated that stance, telling journalists it was still investigating the practice.

The SFO said its general counsel, Sara Lawson QC, made the decision to close the Libor investigation because its director, Lisa Osovsky, was recused from the Libor case.

Ms Osovsky has a background of roles in enforcement, including as deputy general counsel to the US Federal Bureau of Investigation (FBI), which has investigated Libor rigging.

https://www.bbc.co.uk/news/business-50107320

 

 

[Errol]

Got too close to the truth.

[Democorruptcy]

1 hour ago, Errol said:

Got too close to the truth.

It's mere coincidence that the director of the SFO who recused herself from the case because of a potential conflict of interest, used to work at Goldman Sachs. It's always Goldman Sachs!

[Noallegiance]

"The decision comes despite evidence that implicates the Bank of England."

Gee. I. Am. Shocked.

[BoSon]

Too big to fail.

[spygirl]

Its fizzled out, thats all.

Hard to prove cgarge.

Wont happen again as all the human traders are getting the boot.

And no banks are trading currency on their own account as needs too much capital. And its forbidden.

[dgul]

2 hours ago, spygirl said:

Its fizzled out, thats all.

Hard to prove cgarge.

Wont happen again as all the human traders are getting the boot.

And no banks are trading currency on their own account as needs too much capital. And its forbidden.

Sure, that won't happen again.  But there'll be something else that they'll take advantage of.  The lesson from this is that finance types are above the law (so long as they don't do anything really stupid, and so long as they've got sufficient complexity that their dodgy behaviour can't easily be followed).  It truly stinks.

[Rave]

What stinks is that they chucked a bunch of junior employees under the bus, and the top brass walked. I was a juror on one of the trials.

As a juror, you're allowed to submit questions. So I asked why it was that a superior of the people we were trying was "not accused of any wrongdoing" when he was clearly involved in an email discussion of the practice. The judge asked the press and public to leave the court while my question was read out to the defendants and lawyers, then when he recalled us all said, in effect, "you may think x is lucky not to be on trial, but you're not here to try him".

Yeah well I'm not here to deliver partial, selective justice either mate

Edit: I should add for balance that a lot of banks paid a lot of money in fines, far more than they'd ever profited from rigging the rates as far as I can tell. Which is fine; they definitely did it and it was definitely a shady practice. It's the picking a few juniors out for a show trial that I object to.

[BurntBread]

19 hours ago, Rave said:

What stinks is that they chucked a bunch of junior employees under the bus, and the top brass walked. I was a juror on one of the trials.

As a juror, you're allowed to submit questions. So I asked why it was that a superior of the people we were trying was "not accused of any wrongdoing" when he was clearly involved in an email discussion of the practice. The judge asked the press and public to leave the court while my question was read out to the defendants and lawyers, then when he recalled us all said, in effect, "you may think x is lucky not to be on trial, but you're not here to try him".

Yeah well I'm not here to deliver partial, selective justice either mate

Edit: I should add for balance that a lot of banks paid a lot of money in fines, far more than they'd ever profited from rigging the rates as far as I can tell. Which is fine; they definitely did it and it was definitely a shady practice. It's the picking a few juniors out for a show trial that I object to.

You should be proud of that, Rave: that's closer than most of us will get to pointing them out for what they are, and I'm very glad you took the trouble to ask, even if it had no obvious effect. As for fining the banks, there is essentially no justice in putting the legal fiction of a "corporate person" on trial (or essentially slapping the shareholders, and hoping this feeds back into a change of corporate culture by long and very circuitous routes). It's the direct punishment of the actual people in charge which will change things, and only that. I'm convinced that most of the power of the health and safety legislation since the 70's is because, in extremis, executives can be personally charged with manslaughter.

[Rave]

The thing that I think almost nobody gets, and would have no reason to unless they were involved in the rigging or any of the trials (because the reporting has been simplistic) is that there were varying types of rigging going on. At the lowest end, the guys we were trying were simply adjusting their submissions a basis point or two on days when their bank had ended up with a significant position one way or the other. Loads of banks were quite obviously doing it; and indeed it wasn't even specifically banned by the EURIBOR code of conduct, a spectacularly wooly and useless document if ever there was one. It wasn't until a court of appeal ruling early last year that it was definitively declared to be illegal to do it. The main effects were on interest rate derivatives markets- the prosecution constantly told us bleeding heart stories of the poor mortgage holders whose rates were tied to the EURIBOR rate, but the traders were as likely to adjust their submissions down as up; I sincerely doubt that anyone ever paid more than a trivial sum extra for their mortgage because of it. And the derivatives are pretty much a zero sum game; they'd all make bets against each other on the rates and then try to influence the rate to suit themselves. I daresay that more banks on the EURIBOR panel were cheating than not; and I daresay they all cancelled each other out to a large extent. To me it seemed that anyone involved in the market would easily have seen that that was how the game was played, and nobody made a fuss at all for years. I didn't, and still don't, think that to play the same game as everyone else constitutes a criminal conspiracy.

These lads took it a step further:

https://www.bloomberg.com/news/articles/2018-07-19/former-traders-sentenced-to-combined-13-years-in-euribor-case

...by deliberately taking large positions in advance and then conspiring across several banks to manipulate rate submissions on certain days. Definite malice aforethought, definite insider trading.

And then there's the IMO entirely separate business of lowballing. The guys who've gone on trial were adjusting their interest rate submissions by a couple of hundredths of one percent. During the financial crisis banks ended up submitting rates that were a quarter or even a half percentage point lower than they could have possibly borrowed. On one day 5 or 6 French banks submitted an identical, and completely fantastical, rate. You don't have to be much of a conspiracy theorist to think that there was some high level co-ordination going on there.

Ironically it was one of the guys on my trial that first spotted it and started making a fuss about it. The other guy, also spotting that something was amiss, discussed the prospect of asking to borrow some money in the interbank market at above the submitted rates, simply to show that nobody was actually lending money at that price, and (as far as I can tell) to try to shame the lowballing banks into upping their rate submissions. This was held up by the prosecution (who were obviously doing the bidding of the SFO) as evidence of wrongdoing! That was a proper WTF moment for me- if someone wants to actually put their money where their mouth is to try and do a bit of price discovery in an illiquid market, then as far as I'm concerned that's not only legal, they're actually doing everyone a service.

Of course I spent hours trying to explain that to the other jurors, but all but one of them were far too dim to even come close to understanding it. 'They should have just hedged the bet' was the authoritative conclusion of the biggest fuckwit of the lot.