Rabobank Faces Libor-Rigging Fine of $440 Million Plus
Rabobank Groep faces a fine of more than $440 million for Libor rigging as global regulators seek to increase the $2.5 billion in penalties already levied in the rate-manipulation scandal.
Rabobank, the second-biggest Dutch lender, is next in line to reach a settlement with the U.S. Commodity Futures Trading Commission, the Department of Justice and the U.K. Financial Services Authority over claims it tried to manipulate benchmark interest rates, said four people with knowledge of the probe who asked not to be identified because the talks are private.
The penalty, which may come as soon as May, is likely to be between the 290 million pounds ($440 million) Barclays Plc (BARC) paid in June and the $612 million Royal Bank of Scotland Group Plc paid this month, one of the people said. Rabobank, formed in 1898 as a co-operative to lend to Dutch farmers, is the country’s only contributor to the London interbank offered rate, the benchmark for more than $300 trillion of securities.
Barclays, UBS AG and RBS have been fined more than $2.5 billion following a global probe into Libor manipulation. Traders rigged the benchmark to profit from bets on derivatives, while banks sought to submit artificially low rates to appear financially healthier than they were, according to regulators.
Closely held Rabobank is under scrutiny for alleged attempts to manipulate sterling Libor, dollar Libor, Japanese yen Libor and Euribor in its London, New York, Tokyo, Singapore and Hong Kong offices, one of the people said.
“It’s likely that an assessment of the facts and circumstances will lead to a settlement,” Rabobank said in a statement today. “The amount of such a settlement cannot be estimated reliably at this time,” nor can the timing of any announcement, the firm said.
The bank has said it’s been subpoenaed or asked for information by watchdogs in eight jurisdictions, including the European Union, Japan, Hong Kong, Singapore, Switzerland as well as the Netherlands, and is cooperating. The firm said today it will also defend itself in civil cases pending in the U.S. involving Libor and Euribor.
Rebekah Carmichael, a DOJ spokeswoman, and Steven Adamske, a CFTC spokesman, declined to comment, as did a spokesman for the FSA in London.
The probe has intensified in recent months, with officials from the DOJ and U.S. Federal Bureau of Investigation traveling to London to interview current and former Rabobank employees, two of the people said. Those talks have ended and the regulators are now in talks with the bank’s lawyers over the details of a settlement, the people added.
The Dutch lender has fired four traders for possible involvement in rate rigging, one of the people said.
Regulators are also focusing on Christian Schluep and Paul Robson, two derivatives specialists who left Rabobank in 2008 to join Bank of Tokyo-Mitsubishi UFJ, the banking unit of Mitsubishi UFJ Financial Group Inc. (8306) The Japanese bank suspended the two in July, saying the action wasn’t linked to their work at Mitsubishi UFJ.
Shinya Matsumoto, a Tokyo-based spokesman at Mitsubishi UFJ, declined to comment on the current status of the people. Lawyers for the two men declined to comment.
Rabobank posted a 29 percent decline in first-half profit to 1.31 billion euros ($1.7 billion). It will report full-year earnings on Feb. 28. The lender had about 341 billion euros in deposits at the end of June and a core Tier 1 capital ratio, a measure of a bank’s financial strength, of almost 13 percent.
Libor is calculated by a poll carried out daily by Thomson Reuters Corp. on behalf of the British Bankers’ Association, an industry lobby group, that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. The top and bottom quartiles of quotes are excluded, and those left are averaged and published for individual currencies before noon in London.
To contact the reporters on this story: Lindsay Fortado in London at firstname.lastname@example.org; Maud van Gaal in Amsterdam at email@example.com; Greg Farrell in New York at firstname.lastname@example.org