£290 mill in fines, what do bankers have to do go to prison?
Discussion
turbobloke said:
He had a slot on Radio 2 today speaking spaffing on this.
Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
He's like a record player - or the kid in the playground who runs to the teacher because you're having a fag behind the bikesheds. It's a big deal in the banking world, but it's not going to affect Joe Public one jot. I only wish he chased Gordon Brown with the same vigour for screwing up the public finances by the billions/trillions (and you'll be noticing this for many years to come).Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
To cream a couple of bps on their swap transactions, but that's all it was 1 or 2 bps - they nudged it up or down according to what the traders asked for i.e. 'fixing' the 'fixing'.
But you're right it's totally unacceptable, especially nowadays, though stuff like this must have been commonplace in the 80s and without any pesky e-mail traces - remember that film 'Dealers' with Rebecca De Mornay?
fido said:
turbobloke said:
He had a slot on Radio 2 today speaking spaffing on this.
Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
It's a big deal in the banking world, but it's not going to affect Joe Public one jot. Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
Mojocvh said:
fido said:
turbobloke said:
He had a slot on Radio 2 today speaking spaffing on this.
Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
It's a big deal in the banking world, but it's not going to affect Joe Public one jot. Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
Okay - put the following in order of impact:
a) UK debt mountain accumulate by the last shower in power - inflation on your shopping basket, higher taxes, pensions for years to come
b) RBS cutting corners on their systems expenditure
c) City boys playing around with the LIBOR reference rate
Now suggest an appropriate fine or punishment and compare with real-life. Then note which ones the politicians had some input towards (RBS was under alot of pressure to cut costs). I think the cumulative fines (across all the banks involved) will be pretty hefty - except for UBS who seem to have done a deal to avoid an investigation.
fido said:
turbobloke said:
He had a slot on Radio 2 today speaking spaffing on this.
Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
He's like a record player - or the kid in the playground who runs to the teacher because you're having a fag behind the bikesheds. It's a big deal in the banking world, but it's not going to affect Joe Public one jot. I only wish he chased Gordon Brown with the same vigour for screwing up the public finances by the billions/trillions (and you'll be noticing this for many years to come).Even so it's an unacceptable state of affairs. What's the point of the fine, however high this went up the Barclays greasy pole there should be P45s and a file heading over to plod.
To cream a couple of bps on their swap transactions, but that's all it was 1 or 2 bps - they nudged it up or down according to what the traders asked for i.e. 'fixing' the 'fixing'.
But you're right it's totally unacceptable, especially nowadays, though stuff like this must have been commonplace in the 80s and without any pesky e-mail traces - remember that film 'Dealers' with Rebecca De Mornay?
Use Psychology said:
Adrian W said:
Can the same argument not be put forward regarding the Totonham rioters, the judges didn't see it like that.
the difference being, of course, that a company is a legal entity in its own right, and a mob isn't. The whole purpose of companies is to limit the liability of the individuals working for/owning that company, These guys should be jailed. End of.
Unless you're telling me that these traders didn't know what they were doing? Even more frightening than the thought that they are dishonest and corrupt. That's expected.
crankedup said:
For all that, its fraud that's been committed in collusion with other banks apparently. Can't be much worse than this. Must have been money for nothing in years gone by, oh wait, it still is, what a surprise.
AJS- said:
Am I the only one to see some irony in the government handing out a fine to a bank for "lying to make themselves look more financially secure?"
Indeed.What fine should be paid by governments colluding with other governments - and whatever it is, it should definitely not be taxpayer money taken from government and then given back to government (fining itself) but full loss of pension from the politicians and any public servant(s) in collusion, on top of the outcome of criminal proceedings.
How about the EUSSR and its accounts, also the Eurozone with a modern history of years of blatant buls
tting from so many players on that stage. This is done to keep power and their snouts in the trough and covers £sums as big as it gets.Likewise in the public sector where a department under threat of closure with redundancies might win a contract with its own Council against more cost-effective bids from the private sector, this never happens though.
Internal governance failure, big time.
When you see how "mandatory" training is handled in all the big banks it's no wonder this sort of crap happens.
Finding guilty parties would be like shooting fish in a barrel. I wonder if there were any political motivations in outing Barclays first....
When you see how "mandatory" training is handled in all the big banks it's no wonder this sort of crap happens.
Finding guilty parties would be like shooting fish in a barrel. I wonder if there were any political motivations in outing Barclays first....
DSM2 said:
What relevance has that? The limitation doesn't extend to illegal, corrupt actions.
These guys should be jailed. End of.
Unless you're telling me that these traders didn't know what they were doing? Even more frightening than the thought that they are dishonest and corrupt. That's expected.
i agree with you but I was just pointing out that the rioters have no excuse - their actions were the actions of an individual. the actions of the employees of barclays are collectively the actions of barclays, so there is another legal entity that can be punished. even if the individuals who behaved wrongly in this case should be punsihed too. These guys should be jailed. End of.
Unless you're telling me that these traders didn't know what they were doing? Even more frightening than the thought that they are dishonest and corrupt. That's expected.
I find it amusing that since most of the public, journalists and the FSA have littel idea of how interbank lending works they can suggest that one bank is able to even move the market.
Copied and pasted from a mate who works in the bond markets. He is not a derivatives or cash trader (ie a setter) but has quite an understanding of how the system works, worked prior to the crash and so on:
FAOD, not defending banks - but thought I'd post an insider's take on it.
Copied and pasted from a mate who works in the bond markets. He is not a derivatives or cash trader (ie a setter) but has quite an understanding of how the system works, worked prior to the crash and so on:
mate who works in banking said:
This fine is bks and basically Barclays saying "We can't be arsed with you disturbing our cash business by subpoenaing traders." The FSA has yet again demonstrated that it knows sod all about anything.
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 fked 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
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!
The last point is interesting. Had the banks declared the real interbank lending rate (ie when nobody would lend to other banks due to risk of collapse etc) then LIBOR would have gone through the roof.ks and basically Barclays saying "We can't be arsed with you disturbing our cash business by subpoenaing traders." The FSA has yet again demonstrated that it knows sod all about anything.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
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!
FAOD, not defending banks - but thought I'd post an insider's take on it.
johnfm said:
I find it amusing that since most of the public, journalists and the FSA have littel idea of how interbank lending works they can suggest that one bank is able to even move the market.
Copied and pasted from a mate who works in the bond markets. He is not a derivatives or cash trader (ie a setter) but has quite an understanding of how the system works, worked prior to the crash and so on:
Copied and pasted from a mate who works in the bond markets. He is not a derivatives or cash trader (ie a setter) but has quite an understanding of how the system works, worked prior to the crash and so on:
mate who works in banking said:
said a lot of relevant stuff
I can understand the desire to keep rates low from 2007/8 onwards during the credit crunch, for overall market/public confidence and to protect Barclays from being another RBS (perhaps), but why for 2-3 years before it unless they had either big cash flow issues (judging by their balance sheet and profits probably not) or remarkable foresight?It is clear now to everyone other than a vanishingly small number of dedicated apologists for the banks that "light-touch" regulation so loved by Gordon Brown, John Redwood and others is not working. The banks have obviously taken it as a green light to act fraudulently and criminally.
Fines don't work, especially when they amount to less than the profits criminally acquired. We need some proper criminal investigation and some of those responsible to do some time in prison before they'll take it seriously.
Fines don't work, especially when they amount to less than the profits criminally acquired. We need some proper criminal investigation and some of those responsible to do some time in prison before they'll take it seriously.
djstevec said:
I can understand the desire to keep rates low from 2007/8 onwards during the credit crunch, for overall market/public confidence and to protect Barclays from being another RBS (perhaps), but why for 2-3 years before it unless they had either big cash flow issues (judging by their balance sheet and profits probably not) or remarkable foresight?
The credit spreads between LIBOR and (much) riskier assets (e.g. EURO bonds, Mortgage-Backed Securities) were tiny in the years leading the crunch so i guess it was another way of increasing the margin on these very unprofitable flow trades - every little helps. At the time the credit derivatives people were getting all the attention (and champagne).I doubt anyone will be going to prison over this. I expect the FSA to prosecute those involved under "Market Abuse" legislation which is a civil offence, thus porridge is off the table.
They could prosecute under "Misleading Statements and Practices" but as it's a criminal offence it is much harder to prove and our beloved regulator loves to take things easy...
They could prosecute under "Misleading Statements and Practices" but as it's a criminal offence it is much harder to prove and our beloved regulator loves to take things easy...
johnfm said:
mate who works in banking said:
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 fked 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!
Sorry. Some of this is inaccurate to say the least. The banks or rather their employees did manipulate the fixings. I know of at least three banks (including Barclays) who have over the course of the last couple of years fired employees who were involved with this....this was done after a lengthy review/audit by external law firms who went through all e-mails and voice tapes for the relevant employees. The people involved have been fired with due cause and their careers are over....idiots as some of them were doing it not to profit themselves but to allow thier colleagues to profit. We're not talking huge sums at all but they they did do it.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!
The reality is traders do this and have done this for many,many years in a more innocent way....it's known as "painting the screens" traders "manipulate" the market to try and make more money or even probably lose less money on a loss making position.
Say for exmaple two traders thinks the right price for Vodafone shares is 100p to 110p i.e. he will buy shares at 100p and sell them for 110p.
However the two different traders have a different method for trying to buy those shares
Trader A decides he wants to buy those shares as quickly as possible....he tells his clients that he will pay 105p to buy any Vodafone shares.
Trader B on the other hand is desperate to make some money and tries to buy the shares a bit cheaper so he calls the market lower than he actually thinks it is. He tells all his clients the price is 97p to 107p....and he keeps his fingers crossed nobody wants to buy any more off him at 107p. Trader B is painting the screens in the same way that someone could be accused of with the libor fixings....he is trying to "manipulate" the market to make more money.
You can make parallels to that in any walk of life where people are charging for goods.
You can go to two car dealers....one is desperate to do a deal and wants to charge you £20k for a brand new Golf....another dealer wants to chance his arm and thinks you're not a switched on buyer so say his price is £21k for exactly the same car.
turbobloke said:
crankedup said:
For all that, its fraud that's been committed in collusion with other banks apparently. Can't be much worse than this. Must have been money for nothing in years gone by, oh wait, it still is, what a surprise.
AJS- said:
Am I the only one to see some irony in the government handing out a fine to a bank for "lying to make themselves look more financially secure?"
Indeed.What fine should be paid by governments colluding with other governments - and whatever it is, it should definitely not be taxpayer money taken from government and then given back to government (fining itself) but full loss of pension from the politicians and any public servant(s) in collusion, on top of the outcome of criminal proceedings.
How about the EUSSR and its accounts, also the Eurozone with a modern history of years of blatant buls
tting from so many players on that stage. This is done to keep power and their snouts in the trough and covers £sums as big as it gets.Likewise in the public sector where a department under threat of closure with redundancies might win a contract with its own Council against more cost-effective bids from the private sector, this never happens though.
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