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heppers75
2,281 posts
86 months
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Oh I love PH... Some of you chaps need to go and invest... In these!!!! 
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NorthernBoy
6,025 posts
126 months
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Jasandjules said: Seems that way doesn't it.
Write to your MP and demand that these kinds of people face jail for this kind of s**t. Is that how the judicial system works in your head, MPs deciding on who's prosecuted? Pray tell, with such a poor connection with reality, how do you manage to put your trousers on in the morning?
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NorthernBoy
6,025 posts
126 months
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Randy Winkman said: What was the point of it then? Relatively small advantages for what they (incorrectly) thought was relatively minor tampering. They were wrong, and this sort of thing should be heavily condemned, but let's not pretend that they were distorting anything in a major way. If a company hedged a hundred million pound ten year loan, then each instance of this (at most once every six months on a long-dated GBP swap) would cost them a maximum of about £400. By contrast, the value of the deal itself would be fluctuating £300,000/day. It's the equivalent of a car dealer rounding up labour to the nearest ten minutes, not the equivalent of them telling you that your car needs a new engine. And to repeat myself again, this is not to forgive what was done, just to give it some scale and context.
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lazygraduand
1,511 posts
30 months
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NorthernBoy said: Is that how the judicial system works in your head, MPs deciding on who's prosecuted?
Pray tell, with such a poor connection with reality, how do you manage to put your trousers on in the morning? 
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Shuvi McTupya
17,750 posts
116 months
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NorthernBoy said: Relatively small advantages for what they (incorrectly) thought was relatively minor tampering.
They were wrong, and this sort of thing should be heavily condemned, but let's not pretend that they were distorting anything in a major way.
If a company hedged a hundred million pound ten year loan, then each instance of this (at most once every six months on a long-dated GBP swap) would cost them a maximum of about £400. By contrast, the value of the deal itself would be fluctuating £300,000/day.
It's the equivalent of a car dealer rounding up labour to the nearest ten minutes, not the equivalent of them telling you that your car needs a new engine.
And to repeat myself again, this is not to forgive what was done, just to give it some scale and context. If the risks were so small, the directors of the banks should have guaranteed to make up any losses out of their own pocket..
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Steffan
Original Poster
6,187 posts
97 months
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NorthernBoy said: And to repeat myself again, this is not to forgive what was done, just to give it some scale and context. Scale and context are important. £280 million is the figure now, I understand including the American fines. Some scale, some context! To give this some real business context, there are prosecutions and banning orders being handed out by the Dti every week in the UK, to Company Directors who have failed to submit accounts, or failed to pay the Inland Revenue their dues, who are left with no means of getting the money together, because their businesses have been destroyed in the UK by the recession. For sums of perhaps £50,000 0r £100,000. They cannot be Directors any more. Frequently for five to seven years. That is the context that ordinary businessmen face. These are ordinary people trying to run businesses in extremely difficult times. This cannot be right or fair in comparison to the Barclays fraud. In that factual context, what do you suggest as a reasonable penalty for the Director of a Company, for that is what all Banks in the UK are, who has been responsible for a £280 million pound fraud? Jail Sentence? Banning order for ten years as a Director? The Banks have been fined £280 MILLION. This cannot be either right or fair. There is effectively, no cost to the Directors who were responsible for this activity. The crime seems to be beyond the wit of the establishment. This is becoming reminiscent of the classic example that used to be quoted in the history books, of the appalling injustice, in the 19th century in the UK, when the desperate poor, were being deported for stealing sheep and at the same time the establishment was handing out, knighthoods and other honours, to their own pals, who were clever enough to steal the land on which the sheep were resting. This really is utterly disgraceful. The Bankers cannot be above the law. This fine will cost the Directors NOTHING. Bob Diamonds bonus has already been removed, but he is STILL earning well in excess of £2 Million a year. He is responsible for this fraud as the prime manager in Barclays. Certainly as responsible as the ordinary company Directors I mentioned above The shareholders of the Banks will be losing the money, not the Directors. We need a strong, properly supervised, banking sector in the UK. This kind of cavalier approach is never going to produce that. This is, simply, wrong and disgracefully so.
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Guffy
1,696 posts
134 months
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Steffan said: Good retort. I like the cut of your jib.
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Digga
10,898 posts
152 months
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NorthernBoy said: It's the equivalent of a car dealer rounding up labour to the nearest ten minutes, not the equivalent of them telling you that your car needs a new engine. If that is so, why the histrionics and high-fives about the rate setting in the email transcripts we've all seen? When a small alteration in rate prompts such effusive praise and gratitude surely there must be more being made, at the very least for the individual trader? This is a genuine question.
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crankedup
9,237 posts
112 months
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No wonder Bob Diamond can't stop grinning. And he had the neck to give a speech on banking morality last year! Investment bankers now ranked below car clamper's apparently, no surprise there.
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Digga
10,898 posts
152 months
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turbobloke
55,486 posts
129 months
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eccles said: I wondered how long it would be before Labour were blamed for it.  I'm surprised you didn't say it wasn't their fault and it was Labours for not regulating them enough. The people to blame for committing fraud are the fraudsters. In 2006 Ed Balls said: Today our system of light-touch and risk-based regulation is regularly cited – alongside the City’s internationalism and the skills of those who work here – as one of our chief attractions. It has provided us with a huge competitive advantage and is regarded as the best in the world. Nicely prophetic. Fast forward to June 2012.
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NorthernBoy
6,025 posts
126 months
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Digga said: If that is so, why the histrionics and high-fives about the rate setting in the email transcripts we've all seen? When a small alteration in rate prompts such effusive praise and gratitude surely there must be more being made, at the very least for the individual trader? This is a genuine question. We work making profits of a fraction of a hundredth of a percent, but on very big deals, and so even a small change such as this will have a noticeable effect on the bottom line (which is why I've said that it's wrong, and likely warrants prosecution). It's similar to if, for example, Ford told its service staff to round every job up to the next ten minutes. That makes money on aggregate, quite a bit of money, but is at a different level to telling them to smash the sump with a hammer on receipt of the car. Moving an interest rate fixing by 0.00001 seems to me closer to the former than the latter. It's also worth pointing out that the fixing put in by a bank is an opinion, not a measured quantity. There is uncertainty of more than a basis point on the cost of three month money, and so I'd speculate that the traders viewed this as a valid movement within the margin of uncertainty in most cases, which they maybe felt was "fair" in exchange for the responsibility of having to submit fixes each day. The thing which has actually hurt clients is the large disparity between LIBOR and borrowing costs, not the odd fraction of a basis point meddling that's been reported here. Remember, if one bank has a 80 iard fixing and wants a high fix, then it's very likely that the rest of the street is carrying the opposite side, and is doing the same the other way round. It's very hard to tell what the aggregate effect will have been.
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crankedup
9,237 posts
112 months
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NorthernBoy said: Digga said: If that is so, why the histrionics and high-fives about the rate setting in the email transcripts we've all seen? When a small alteration in rate prompts such effusive praise and gratitude surely there must be more being made, at the very least for the individual trader? This is a genuine question. We work making profits of a fraction of a hundredth of a percent, but on very big deals, and so even a small change such as this will have a noticeable effect on the bottom line (which is why I've said that it's wrong, and likely warrants prosecution). It's similar to if, for example, Ford told its service staff to round every job up to the next ten minutes. That makes money on aggregate, quite a bit of money, but is at a different level to telling them to smash the sump with a hammer on receipt of the car. Moving an interest rate fixing by 0.00001 seems to me closer to the former than the latter. It's also worth pointing out that the fixing put in by a bank is an opinion, not a measured quantity. There is uncertainty of more than a basis point on the cost of three month money, and so I'd speculate that the traders viewed this as a valid movement within the margin of uncertainty in most cases, which they maybe felt was "fair" in exchange for the responsibility of having to submit fixes each day. The thing which has actually hurt clients is the large disparity between LIBOR and borrowing costs, not the odd fraction of a basis point meddling that's been reported here. Remember, if one bank has a 80 iard fixing and wants a high fix, then it's very likely that the rest of the street is carrying the opposite side, and is doing the same the other way round. It's very hard to tell what the aggregate effect will have been. Neat waffle but misses the point by a country mile, its collusion and fraud that is the problem here!
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johnfm
9,018 posts
119 months
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Digga said: NorthernBoy said: It's the equivalent of a car dealer rounding up labour to the nearest ten minutes, not the equivalent of them telling you that your car needs a new engine. If that is so, why the histrionics and high-fives about the rate setting in the email transcripts we've all seen? When a small alteration in rate prompts such effusive praise and gratitude surely there must be more being made, at the very least for the individual trader? This is a genuine question. Bravado mainly. I posted this on the other Barclays thread and do so again here. From a mate of mine who works in banking (but neither derivatives or the cash desk). The conclusion is that since the LIBOR is set by excluding outliers and taking an average of many banks' interest rate submissions, a single setter would struggle to move the market. However, in a business where relationships with other traders/bankers is important and IM chatter is constant, it would seem the banter is commonplace. ANyway, his take on it; my mate the banker said: So, this is how it works in practice. When LIBOR was instituted, all banks were well rated and would lend to each other on the interbank market with impunity. You would literally get a broker call you and say "Where will you lend 3mth dollars?". You would give a rate and then he would say "USD500mio done. Your counterparty is X". X could be a AAA rated bank like Rabobank or someone lower rated (say Coventry Building Society). The point is that no-one cared who the borrower was as the assumption was that it was going to re-pay. Around 10am the submitters get a call asking them to quote "the rate" on a variety of different maturities and currencies. The banks provide an indication of where they believe that they would lend to another well rated bank. However in order to lend money at a profit, they have to be able to borrow it themselves cheaper. As a result a bank thinks "Well I can borrow at Y.YY% so I would need to lend at Y.YY% plus 0.06% to make a reasonable margin." And this is how LIBOR worked for years. In EUR, AUD, USD, CAD the fixing was always around 0.06% higher than where a bank could execute the trade. In Sterling it was normally about 0.125% higher due to the convention that it trades on eighths. It isn't some massive conspiracy... it is good business sense and most importantly it was consistent. So let's look at what happens when banks started exploding. Everyone in the market knew that RBS was fvcked. They were borrowing billions a day and most banks could not lend them any more due to risk limits. So when BBAM phones you and says "Where's the rate?" the system wasn't set up to factor in credit risk. If the question was "Where would you lend to RBS?" then the answer would have been "I wouldn't.". The BBAM was hardly getting its top tier staff to make the calls either and look for explanations on the rate - it was a low level clerk just filling in a spreadsheet. The banks were not being malicious in setting the fixings - they were actually trying to maintain a consistency by assuming a good market. To dispel some myths : 1. The LIBOR fixing does not allow banks to "cheat" by mis-declaring funding costs. 2. A low fixing saves borrowers money as it impacts the swap rate. 3. Banks did not "make up" the figure any more than they did previously. It was their interpretation of where an utterly f  ked market should be. 4. There is no way to replace LIBOR easily. Reported transactions tend to be too short to be useful as an indicator. 5. No one bank can impact the rate as it is an average with outliers excluded. 6. Most of the reported comments are banter that is typical in a bank. No worse than for example someone in a law firm jokingly saying "haha. This deal is gonna have a LOT of billable hours". Traders in a firm talk for 16 hours a day on messaging systems and all markets impact each other. It is natural for someone to say "Chz for your market helping mine". No trader is naive enough to think that they can control the market by a single submission. 7. I am sure that fixings will have been discussed internally and probably even with other banks. However most of this is traders trying to "find" the market - not collusion. 8. The comments about traders being seduced by promises of Bollinger and coffee are risible. Believe me - a submitter will earn somewhere between GBP400k and GBP1.5mio per year and really doesn't need someone to buy him a bottle of Bolly to have a good time! AND Also, I take your point about not reading too much into trader IM trash talk - don't think they care about a bottle of bolly, but I'm sure they care quite a bit about the relationships they tried to maintain by rigging the fix. Why? Barclays cash desk makes virtually nothing out of their swaps desk. You are reading in something that isn't there. Relationships in a bank are based upon making money and there is no financial gain here for them personally. Fvck - it's like any lawyer claiming to have helped out on a deal on his CV when actually they just paginated it. It's true, but not as true as the reader thinks. I'm struggling to see how you can defend this tbh - some of those emails explicitly talk about how they are pulling off a coup but need to keep it a secret or it won't work - because they knew it was dodgy. Largely because they really haven't done anything nearly as bad as people are saying. What if they suddenly flip to calling it where it really is? Imagine the situation in Sterling with the following panel. How many of these do you think really could have borrowed Sterling for 1yr when RBS went under or the day after Lehman? Abbey National plc Bank of Tokyo-Mitsubishi UFJ Ltd Barclays Bank plc BNP Paribas Citibank NA Credit Agricole CIB Deutsche Bank AG HSBC JP Morgan Chase Lloyds Banking Group Mizuho Corporate Bank Rabobank Royal Bank of Canada The Royal Bank of Scotland Group Société Générale UBS AG 6 of them at the most. The rest would have had to quote something like 100%. That would have forced mortgage rates up to about 20% for everyone on a floating rate mortgage within a week! AND "As the U.S. Dollar senior submitter said in October 2008 to his supervisor at the time, “following on from my conversation with you I will reluctantly, gradually and artificially get my libors in line with the rest of the contributors as requested. I disagree with this approach as you are well aware. I will be contributing rates which are nowhere near the clearing rates for unsecured cash and therefore will not be posting honest prices." This is an internal disagreement over where it is set. As I was saying earlier, convention sets it 6bp higher than where the perception of the market is. The boss has clearly told him to get back in line with convention rather than putting his own interpretation on things and establishing a new convention. As it is a theoretical number, there is nothing wrong with this at all, no matter what you think it looks like! AND "Why would they accept three hundred million pounds worth of fines and forgo their bonuses if they had done nothing wrong?" For exactly the same reason that insurance firms settle car accidents. It just isn't worth the hassle of fighting. If you take a load of traders offline it interrupts business badly. In addition, the US regulator is a with a bone with even more of a silly political agenda than the FSA as prosecutions are driven by DAs. In addition, if I recall correctly, Diamond's background was running one of the business areas that could have a finger pointed at it and Barclays stock would get hammered if he came directly under the microscope. Forgoing bonuses isn't a problem when you have been paid as much as they have and can choose your own bonus next year... Putting silly comments on IM is something that traders are always warned about but bear in mind that we chatter all of the time to one another and occasionally an "in joke" may look incriminating. ie. At the moment I have 34 different chats open with other traders, 5 of whom I regularly socialise with outside of a work context. Joviality is bound to happen. Just to demonstrate the utter silliness of one of the quotes, a trader is reported as saying something like "Yeah can you fix it low?". "Sure. 5.36%?" replies the submitter. "5.37% is fine" is the response. Now, assuming that the trader asking was even being serious he would have known that his submitter's input was worth a maximum of 0.1bp as an average and even then only if he didn't make himself an outlier. If the quote was out of the market it would have been excluded. Traders who chat to the BoE or the ECB will jokingly say "yeah if you could talk to Merv and get him to cut 25bp that would make me a few quid". The fact of the matter is, yet again, that the FSA was asleep on the job and they want a scapegoat and a cheap political win. If they didn't like the convention of LIBOR being 0.06% above traded cash then they should have stepped on the practice 10 or 15 years ago. Why didn't they? Because they had fvck all idea about how markets worked and fvck all idea of how LIBOR was set.
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K12beano
14,389 posts
144 months
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You've probably already been there, but for those who have not: FSA Final NoticeNot that we will probably ever get the full story - although the parties talking about writing a book about it all might like to come forward now!!! (Paragraph 59iii) People keep talking about the UK fine. Note that it is of course £85m, rather than the lower amount that is reported just because the Bank are playing ball - they effectively get a standard 30% discount for being nice to the FSA. It irks me that this rarely gets reported in context!
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Digga
10,898 posts
152 months
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crankedup said: NorthernBoy said: Digga said: If that is so, why the histrionics and high-fives about the rate setting in the email transcripts we've all seen? When a small alteration in rate prompts such effusive praise and gratitude surely there must be more being made, at the very least for the individual trader? This is a genuine question. <Helpful answer> Neat waffle but misses the point by a country mile, its collusion and fraud that is the problem here! TBF he very kindly explained the mechanics of the question I posed - which did not enter into matters of law or ethics. I don't think your criticism of NB is fair given the context.
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Gogoplata
477 posts
29 months
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ChrisRS6 said: So.....these massive fines???...where does the money go when they pay the fine?...who too?? I'm wondering this too, anyone?
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djstevec
2,069 posts
43 months
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Gogoplata said: ChrisRS6 said: So.....these massive fines???...where does the money go when they pay the fine?...who too?? I'm wondering this too, anyone? In the UK's case, to the FSA. From FSA website, "Who pays for the FSA? Our budget is met from a levy on the firms we regulate. We receive no funding from the taxpayer. The amount each firm pays is determined according to its size and the types of business it undertakes. When financial penalties are imposed on firms or individuals, the proceeds are used to reduce fees in the following financial year."
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K12beano
14,389 posts
144 months
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"Erious Questions" time...... 
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PRTVR
809 posts
90 months
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crankedup said: NorthernBoy said: Digga said: If that is so, why the histrionics and high-fives about the rate setting in the email transcripts we've all seen? When a small alteration in rate prompts such effusive praise and gratitude surely there must be more being made, at the very least for the individual trader? This is a genuine question. We work making profits of a fraction of a hundredth of a percent, but on very big deals, and so even a small change such as this will have a noticeable effect on the bottom line (which is why I've said that it's wrong, and likely warrants prosecution). It's similar to if, for example, Ford told its service staff to round every job up to the next ten minutes. That makes money on aggregate, quite a bit of money, but is at a different level to telling them to smash the sump with a hammer on receipt of the car. Moving an interest rate fixing by 0.00001 seems to me closer to the former than the latter. It's also worth pointing out that the fixing put in by a bank is an opinion, not a measured quantity. There is uncertainty of more than a basis point on the cost of three month money, and so I'd speculate that the traders viewed this as a valid movement within the margin of uncertainty in most cases, which they maybe felt was "fair" in exchange for the responsibility of having to submit fixes each day. The thing which has actually hurt clients is the large disparity between LIBOR and borrowing costs, not the odd fraction of a basis point meddling that's been reported here. Remember, if one bank has a 80 iard fixing and wants a high fix, then it's very likely that the rest of the street is carrying the opposite side, and is doing the same the other way round. It's very hard to tell what the aggregate effect will have been. Neat waffle but misses the point by a country mile, its collusion and fraud that is the problem here!  We are talking about a bank, most people would not be surprised to be ripped of by a garage, but a bank is a place we put our money and trust with, are you saying we should not?
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