Rate rigging traders to be ‘scapegoats’ as arrests imminent

bob-diamond.jpg
With arrests now imminent over rate rigging, commentators believe
that senior bankers will attempt to scapegoat traders

Scottish news: Rate rigging traders to be ‘scapegoats’ as arrests imminent

by Jamie Mann

US prosecutors and European regulators are preparing to arrest individual traders and charge them with colluding to manipulate global benchmark interest rates, according to the Reuters news agency. 

Federal prosecutors in Washington, D.C. have contacted lawyers representing suspects relating to the scandal to inform them that arrests and prosecutions could occur over the coming weeks.

In respect of cleansing the various financial scandals in the UK financial system, Mark Tennant, chairman of Scottish Financial Enterprise (SFE),  told Scottish Times that traders must receive “relevant punishment” for their actions.

However Mr Tennant argues that the senior management of the banks and those who were meant to be overseeing them -  the regulators and the government - deserve to have their role in the scandal placed in context: “At the time the whole system was in meltdown and I doubt the setting of Libor was that high up their agenda. When you are being shot at you tend to try to avoid the bullets that will kill you and not pay too much attention to those that won’t.”

It appears that individual traders will be held responsible in what some commentators describe as a scapegoating exercise.  Award-winning financial journalist, Ian Fraser believes that the identified “rogue traders” were “obeying orders” from higher up the chain of command.

Mr Fraser told Scottish Times:

"Many banks have sought to blame Libor rigging on individual “rogue traders”, many of whom have already been fired or suspended. But there is strong evidence to suggest that, in both phases of Libor rigging, the traders were only obeying orders from more senior investment banking colleagues.

“If true, this makes attempts of banks such as RBS to scapegoat traders for the activity particularly despicable."

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Increasing evidence which suggests widespread involvement in rate rigging has emerged in the last few weeks.  Jerry del Missier, former CEO at Barclays, told the Treasury Select Committee that the then Barclays chief, Bob Diamond, had clearly told him in October 2008 to “get our Libor rates down”.

Similarly, a salesman at an unidentified major UK bank told the Daily Telegraph that “everyone knew” and “everyone was doing it”.

The salesman alleged that around 30 people, including managers and treasurers, attended a meeting in early 2008 where plans for rate rigging were first established and justified.

Libor rigging is thought to have occurred in two phases: the first from 2005 with traders manipulating lending rates at the request of both peers and rivals; the second beginning around September 2007 - the same time as the financial crisis.

The former CEO of RBS, Fred Goodwin, was demonised by press and politicians alike earlier this year as blame for the failings of Scotland’s largest bank were focused upon the former banker.

Stripped of his knighthood, originally awarded to him for “services to banking”, Mr Goodwin has been said by some to have been a scapegoat for the UK financial crisis as well as the faults of the RBS banking group which lost £24bn of public-money in 2008.

According to Mr Fraser, evidence that traders were working within a general culture of rigging may have emerged in the case of Tan Chi Min.

Tan was RBS’s head of short-term interest rate trading for the Japanese yen and successfully sued the Edinburgh-based bank for wrongful dismissal in December 2011.

RBS said in January that Tan had attempted to manipulate trading rates between 2007 and 2011 to positively affect his own trading interests.

Tan however insisted that he could not have influenced rates as the British Bankers’ Association sets the Libor rate after receiving input from 16 banks, including RBS.

In February, Tan told the Singapore high court:

“Such requests and input were regularly made or given in order to maximize profit… …[RBS] was fully aware of this, condoned such conduct and waived any right to terminate employees on the basis of this.”

The trader, who was based in Singapore, alleged it was “common practise” for the banking group’s senior employees to make Libor rigging requests.

RBS have since denied Tan’s allegations and have requested “strict proof” from the trader.

Tan responded to RBS at a filing on March 23rd that such information was not entitled to the banking group at this stage and would instead be presented as evidence.

As well as rate rigging it has been reported that seven more banks including Santander, the Co-op and Clydesdale have agreed to take part in the Financial Services Authority (FSA) inquiry into the scandal related to the misselling of interest rate swaps which is now driving thousands of small and medium enterprises into liquidation.

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published this page in News 2012-07-23 16:08:00 +0100