JPMorgan Chase & Co., Deutsche Bank AG and HSBC Holdings Plc are among at least seven firms accused by another bank of participating in a conspiracy to manipulate the price of derivatives worldwide for more than three years.
The unnamed bank, seeking immunity, told Canada’s Competition Bureau that traders and cash brokers conspired to influence the Yen London interbank offered rate from 2007 to 2010 to profit on interest-rate derivative positions linked to the benchmark. The bureau spelled out the probe in documents it filed with the Ontario Superior Court in May.
The documents, shown yesterday to Bloomberg News by court clerks, offer one of the most detailed accounts yet as watchdogs in Europe, Asia and the U.S. look into concerns that firms conspired to manipulate interest rates serving as benchmarks for trillions of dollars of financial products. Canada also is investigating Citigroup Inc., Royal Bank of Scotland Group Plc, ICAP Plc and RP Martin Holdings Ltd., the court documents show.
“There is no conclusion of wrongdoing at this time and no charges have been laid,” Alexa Keating, a spokeswoman for the Competition Bureau, said in an e-mailed statement.
Libor rates are generated through a daily survey of firms conducted on behalf of the British Bankers’ Association in London. The lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs.
Communications Among Firms
Canadian officials, who were seeking records from the companies, said the cooperator claimed that the banks’ employees agreed to make artificially high or low submissions for Yen Libor to improve the outcomes of trades tied to the rate. According to the documents, banks communicated with one another and with cash brokers to form agreements. In some cases, derivatives traders allegedly asked cash brokers to help influence submissions for Yen Libor.
Spokesmen for New York-based JPMorgan and Citigroup, Frankfurt-based Deutsche Bank, Edinburgh-based RBS and London-based ICAP declined to comment.
Diane Soucy Bergan, a spokeswoman for London-based HSBC in Chicago, didn’t respond to requests for comment. A call after normal business hours to a U.K. phone number listed on RP Martin’s website for media inquiries wasn’t answered, nor was a call to a number listed for the broker’s New York office.
An ICAP broker was accused of telling a derivatives trader that he would try to get London-based brokers to influence banks participating in setting Yen Libor, according to the bureau. A trader at HSBC also allegedly communicated with cash brokers, instructing them to influence the benchmark rate, the bureau said. Not all attempts to manipulate the rate were successful, according to an affidavit filed by the bureau.
ICAP is the world’s largest broker of transactions between banks.
The Canadian officials said they were seeking lists of people responsible for making Yen Libor submissions, internal communications and records describing so-called Chinese walls separating workers within the banks.
They sought a list of interest-rate derivative trades, including records showing whether the banks made a profit or loss on them. They also requested records showing the process banks used to price interest-rate derivatives and how traders were compensated.
The bureau said it became aware of the case when it was approached by the bank seeking to take advantage of an immunity program. A lawyer for the company told the bureau that by manipulating the rate, participating banks affected all interest-rate derivatives that use Yen Libor as a basis for their price, according to the court filing.