• Nobody understood how Libor was set, Merchant’s lawyer says
  • Dishonesty in mind of senior submitter not trader, lawyer says

The British Bankers Association was merely a members club for senior bankers overseeing a Libor submission process that was understood by no one, including ex-Barclays Plc traders, a lawyer said. 

"The BBA was a members club for senior bankers at the 16 banks and no one else was invited," lawyer Hugh Davies said at the court Friday. "And back on the shop floor, the process wasn’t understood by anybody."

The speech comes near the end of a two-month trial in which Jay Merchant is accused of conspiring with fellow ex-traders Alex Pabon, Stylianos Contogoulas, Jonathan Mathew and Ryan Reich to fix the London interbank offered rate between 2005 and 2007. Another former trader, Peter Johnson, has pleaded guilty to the charge

The benchmark is tied to trillions of dollars in securities and loans, and is determined by a panel of 16 banks polled daily on how much it would cost them to borrow from each other for different periods. To reach the final number, the top and bottom 25 percent of submissions were removed and the remaining numbers averaged.

Davies criticized the BBA and senior managers at Barclays for not doing enough to ensure all traders knew and were trained in the definition of Libor and how it was set. If traders knew what they were doing was wrong, why did they do it so openly, Davies asked the jury.

"If Mr. Merchant knew at the time what he was doing was dishonest, would he have used internal company e-mails to do it," Davies said. "The dishonesty is in the mind of the senior submitter. He knew it was" dishonest.

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