Corlytics, the world leader in regulatory risk intelligence, has dug into the Libor enforcement actions globally to better understand the allegations against the Bank of England pressuring banks to submit lower Libor readings during the financial crisis.
The global data shows that from 2012 to date there have been 60 fines from 7 regulators, involving 13 different institutions totalling more than USD 9.246 billion.
Breakdown of banks wrong doings
The Corlytics data shows that in more than half (53 percent) of all fines given equalling USD 4.9billion were in cases, 18 in total, where senior managers were cited as being aware of inadequate controls and/or were complicit in the manipulation.
The most commonly cited breach (64 percent and 28 fines given) equalling a staggering USD 5.9 billion was in cases where traders used brokers to manipulate rates.
Warnings for inappropriate action were given along the way. Nine percent of all fines were given in cases where there was a prior regulatory warning about similar weaknesses or there was disciplinary action in the area.
John Byrne, CEO of Corlytics said: “This misconduct took place on average over 4-5 years. It was prolonged and deliberate behaviour, with many cases showing awareness by senior management or indeed collusion on their part.
|Conduct allowing manipulation||No. of Fines||% of Fines|
|Failure by Internal Audit||8||22% (2,047,732,000)|
|Cases where senior managers were aware of inadequate controls and/or were complicit in the manipulation||18||53% (4,887,800,000)|
|Cases where there was a prior regulatory warning about similar weaknesses or there was disciplinary action in the area||5||9% (808,732,000)|
|Cases where traders used brokers to manipulate rates||28||64% (5,879,587,000)|
|Communication exchange controls/lack of automated monitoring of chat rooms||12||26% (2,358,312,000)|
|Failure to manage conflict of interest amongst traders in the benchmark process||11||17% (1,551,743,200)|
|Total||60 actions||USD 9,246,822,549|
In defence of The Bank of England
Byrne continues: ‘The reality is that these banks had allowed a lack of controls in important areas that enabled their traders to make a lot of money, not just in rigging markets, but in betting against their clients. The Bank of England cannot be held responsible for that.”
The investigation into the conduct of various banks, during the LIBOR scandal since 2012, exposed a level of wrong-doing by the banks, that has been unparalleled until the exposure of the FX scandal, which is also concerning rate setting by the banks.
An examination of the fining regulators globally shows a clear division between active European regulators handing out more fines but at lower values. Any US regulators coming down hard with heavy fines. The most active regulator has been the European Commission in the number of fines totalling 17 but with a value of USD 2 billion. Whereas the heaviest fines have come from the US Commodity Futures Trading Commission with 14 fines totalling almost USD 3 billion.
|Enforcement Authority||Firm & Individual Fines Amount||Number of Firm/individual Fines|
|U.S. Commodity Futures Trading Commission||$ 2,966,200,000||14|
|U.S. Department of Justice (DOJ)||$ 2,259,000,800||10|
|New York State Department of Financial Services (NYDFS)||$ 600,000,000||1|
|Financial Conduct Authority||$ 1,346,396,610||16|
|The European Commission (EC)||$ 2,015,777,968||17|
|Swiss Financial Market Supervisory Authority||$ 59,302,670||1|
|Serious Fraud Office (SFO)||$ 244,501||2|