For traders at Lloyds Banking Group Plc, “every little helps” when rigging benchmark interest rates, according to transcripts of conversations released by regulators as part of the bank’s settlement.
The internal e-mails, telephone calls and instant messages, laced with expletives, show how rate-manipulation had become a common business practice at Britain’s biggest mortgage lender, according to the Financial Conduct Authority.
“It’s like Tescos,” one Lloyds trader responded when asked to make an artificially low submission to yen Libor in July 2007. “Absolutely, every little helps,” the manager replied, referring to a slogan used by Tesco Plc, Britain’s largest supermarket chain, to promote its discount offers.
Britain’s largest mortgage lender yesterday agreed to pay 226 million pounds ($383 million) in fines to U.S. and U.K. authorities for manipulating benchmark interest rates. Lloyds employees sought to manipulate the London interbank offered rate, benchmark for more than $300 trillion of securities worldwide, to profit from derivatives and to make the bank seem financially healthier than it was, according to regulators.
Sixteen employees, almost half of them managers, were either involved or aware of requests to manipulate sterling, dollar and yen Libor, according to the FCA. They were motivated by the fact the money market desk’s performance helped to determine bonuses, it said.
Libor had become divorced from its purpose of being an estimate of a lender’s true cost of borrowing.
“I can do my LIBORs wherever I f------ want to put them, mate,” a Lloyds trader told a broker at another firm by telephone on August 17, 2007, according to the FCA.
Lloyds will pay 105 million pounds to the FCA, $105 million to the Commodity Futures Trading Commission and $86 million to the Department of Justice. The London-based lender also provided 7.8 million pounds in redress to the Bank of England after four traders manipulated the BBA Sterling Repo Rate.
By pushing up the repo rate, they narrowed the difference with Libor, reducing the fees all banks would have to pay under the Special Liquidity Scheme, a plan put in place by the BOE to help banks through the financial crisis. Lloyds was one of the plan’s biggest beneficiaries, according to the BOE.
Lloyds had a “culture on the money market desks of seeking to take a financial advantage wherever possible,” the CFTC said, adding that the attempts were at times successful.
When a Yen Libor submitter at Rabobank told a Lloyds counterpart he was entering an “obscenely high” rate on July 28, 2006, the British bank’s employee responded by saying “oh dear..my poor customers....hehehe!!”
Both banks’ submissions moved up one basis point on that date, the DoJ said.
Traders at Lloyds bought derivatives that bet on sterling Libor and then attempted to manipulate the benchmark rate to make those contracts profitable, according to the bank’s settlement with the FCA. Two traders who weren’t identified colluded with a broker at another firm in September and December 2006 and made profits of 266,063 pounds and 937,336 pounds on those occasions, according to the settlement.
“You don’t want the market to know what you’re f------ doing,” the broker said to one of the Lloyds traders.