Barclays Libor Rate Fixing: FSA Reveals Emails that saw Bank 'Done.. For You, Big Boy'

"Hi all, just as an FYI, I will be in noon'ish on Monday," wrote one of Barclays Bank's submitters, a person responsible for reporting the interest rate at which one of Britain's biggest banks is able to borrow money, through its dealings with other financial institutions, and derivatives products on offer over-the-counter.

"Noonish? Who's going to put my low fixings in? Hehehe," came the cheeky reply from one of Barclays' traders.

This is just one of the emails released at the conclusion of an investigation by industry regulators the Financial Services Authority (FSA) into Barclays' interest rate fixing of its LIBOR (London Interbank Offered Rate) and EURIBOR (Euro Interbank Offered Rate).

In practices outlawed by the FSA, Barclays traders and submitters worked together to manipulate the interest rates being reported in order to benefit the bank's trading positions and increase its profits.

The bank's chief executive Bob Diamond and three senior executives have decided not to take their multi-million pound bonuses as a result of the revelations. Some are even calling for Diamond's scalp.

At the heart of the FSA probe, which saw Barclays handed the biggest ever fine in the City of London - £59.5m in the UK and a related £230m penalty from US regulators - were a series of revealing, and sometimes astonishing, smoking gun emails, instant messages, and telephone conversations.

Pally relationships

"The big day [has] arrived... My NYK are screaming at me about an unchanged 3m libor," emailed one trader to a submitter. "As always, any help wd be greatly appreciated. What do you think you'll go for 3m?"

The submitter replied: "I am going 90 altho 91 is what I should be posting".

"[...] when I retire and write a book about this business your name will be written in golden letters," responded the trader.

"I would prefer this [to] not be in any book!" his submitter said.

Such casual communication exposes the pally relationship between traders and submitters, despite the clear financial conflict of interest.

"Dude. I owe you big time!" wrote one trader to a submitter.

"Come over one day after work and I'm opening a bottle of Bollinger."

Another Barclays trader emailed a submitter: "If it's not too late low 1m and 3m [rate] would be nice, but please feel free to say 'no'...Coffees will be coming your way either way, just to say thank you for your help in the past few weeks".

His friendly submitter responded: "Done...for you big boy."

Inter-bank conspiring over rates

Another trader built up a trading position in interest rate futures contracts that required a low three month EURIBOR rate in order to do well.

As well as influencing the reporter EURIBOR rate at his own bank downwards, he was in secretive, conspiratorial contact with traders at other banks with a similar trading position to get them to push their own rates down.

"If you know how to keep a secret I'll bring you in on it [...] we're going to push the cash downwards on the imm [International Money Market] day [...] if you breathe a word of this I'm not telling you anything else [...] I know my treasury's firepower...which will push the cash downwards [...] please keep it to yourself otherwise it won't work," he said in an instant message to one of the external traders.

Once the IMM day passed, the Barclays trader noted in an email to the same external trader that their underhand ploy had been a success.

"This is the way you pull off deals like this chicken, don't talk about it too much, 2 months of preparation [...] the trick is you must not do this alone [...] this is between you and me but really don't tell ANYBODY," he wrote.

One external hedge fund trader had emailed a warning to the same Barclays trader.

'send the message we're not in the s**t'

"It's becoming dangerous to trade in 3m imms [...], especially when Barclays sets the 3m very low [...] it does draw attention to you guys. It doesn't look very professional."

Another submitter reveals he was under pressure from management at Barclays to report LIBOR rates that made it look as though the bank was in a better position than the reality.

"[Manager E]'s asked me to put it lower than it was yesterday ... to send the message that we're not in the s**t," he said in a 2008 phonecall.

According to the FSA's report: "Barclays' submission the day before had been 5.05, which was 25 basis points higher than the next highest contributor. Barclays' submission on 8 October 2008 was still the highest submission, but equal with one other contributor."

One manager, in an April 2008 phonecall with the FSA about liquidity, essentially admitted that Barclays, along with other banks, had been submitting artificial LIBOR rates.

"We did stick our head above the parapet last year, got it shot off, and put it back down again," the manager said.

"So, to the extent that, um, the LIBORs have been understated, are we guilty of being part of the pack? You could say we are.

"We've always been at the top end and therefore one of the four banks that's been eliminated. Um, so I would, I would sort of express us maybe as not clean clean, but clean in principle."

Other banks, such as HSBC, RBS, and Lloyd's are also expected to come under fire and fines from the FSA for similar practices, promising more revelatory internal communications from some of the world's biggest and wealthiest banks.