City broker ICAP has been hit with a £54m fine by both American and British financial regulators as three of its former employees have been charged over allegations of manipulating the inter-bank lending rate Libor.
The firm is the fourth organisation to be fined, after a £290m hit on Barclays, £940m for Swiss bank UBS and £391m for the Royal Bank of Scotland.
The allegations centre around ICAP brokers' involvement in attempts to manipulate the Japanese yen Libor rates for the benefit of traders between October 2006 and October 2011. The rate governs the price of hundreds of trillions of pounds of loans and transactions around the world, including household mortgages
The US Department of Justice announced it was charging ex-ICAP brokers Darrell Read, Daniel Wilkinson and Colin Goodman, with fraud.
Emails released by America's Commodity Futures Trading Commission reveal the nature of the conversations, as many offer incentives to help rate-setters put Libor at the level they want, like ferraris, champagne and more. One derivatives broker made a rather saucy offer, writing: "... KEEP 1 MTH AS LOW AS POSSIBLE PLEASE... HE'LL SUCK YOUR OLD FELLA"
If you don't want to wade through trader-speak, HuffPostUK has emphasised the key parts.
October 23, 2006:
Derivatives Broker 1: Morning Lad [Cash Broker 1 ], On the scrounge again, if possible keep 3m the same and get 6mos as high as you can. My guy has an enormous fix on Wednesday in 6mos and will want it as high as possible. Waiting for my credit card to get returned to me from a drunken night out bowling, but will be supplying you with copious amounts of curry on it's imminent return. Cheers
Reasons Why The Banks Aren't Yet In Order
December 7, 2007:
Derivatives Broker 1: Hi [Cash Broker 1], Thanks again for all your efforts, ...Can you do your best to drive these libors higher,especially 3 mos if you can and it is still well bid .... UBS had to stagger their move up but will definitely be in the count today .... p.s Bubbly on its way with [Senior Yen Trader].
February 29, 2008 (via text messages):
Derivatives Broker 1: Ifu can pls move 3m up more than 6m wud be much appreciated :-P
Cash Broker 1: What happens if they go down. 3m looked higher yesterday pm and 6m no change
Derivatives Broker 1: Make 6m go lower! They r going up. [Senior Yen Trader] will buy you a ferrari next yr if you move 3m up and no change 6m
Cash Broker 1: Not bad isuppose 9625 against 01625
Senior Yen Trader: lm libor worries me i need it back under 70
Derivatives Broker 1: [Cash Broker 1] is fully aware of the importance of Mondays libors, I'll call him again this evening before I 13 head off, but as he said last night (he called me at home) its like the Dutch guy standing with his finger in the hole of the dam.
August 23, 2007
Derivatives Broker 1: [Derivatives Broker 3] does [RBS 10 Yen LIB OR Back-Up Submitter] have any influence over their libor sets ... if he does ask him to do us a favour and edge 6m up please ..... think [BankE Yen Trader] was chasing [Cash Broker 1] for a high fix as well ,so should do us all a favour ... thanks
Derivatives Broker 3: [RBS Yen LIBOR Back-Up Submitter] is doing them this wek , he wants 6's up so will be marking them up anyway
Derivatives Broker 1: brooliant!! they are malting fortunes with these high fixings!!! :-) thats UBS,RBS and [BankE]+ M'Lord should be old!