Libor Fixing Scandal: British Broker Icap on Edge of $100m Settlement

British brokerage Icap is close to stumping up $100m in a civil settlement related to its role in the Libor fixing scandal.

According to unnamed sources cited by the Wall Street Journal, the agreement will be announced imminently as Icap, led by former Conservative party treasurer Michael Spencer, is set to settle with authorities over its role in the alleged manipulation of key interbank lending rates.

Icap, one of the world's largest interdealer brokers, declined to comment.

If Icap does settle, it will be the fourth financial group to be penalised for the alleged rigging of Libor valuations, which directly influence the value of trillions of dollars of financial deals between banks and other institutions.

The benchmark reference rates are used in euro, US dollar and British sterling over-the-counter (OTC) interest rate derivatives contracts and exchange-traded interest rate contracts.

In June 2012, Barclays became the first bank to settle with US and UK authorities for a record £290m fine for the manipulation of Libor and Euribor. Five months later, UBS agreed a record $1.5bn fine with US, UK and Swiss authorities for its role in manipulating a number of key benchmark interbank lending rates, including Libor.

In February 2013, RBS agreed to pay £390m to settle US and UK charges related to the manipulation of the Libor.

Investigation

At the beginning of this year, an internal Financial Conduct Authority (FCA) memo revealed that Icap is one of a number of brokerages and banks that have been under investigation by Britain's watchdog for several months for its possible involvement in Libor fixing.

The company confirmed in a statement at the time that it "has been asked to provide information to various agencies investigating the setting of Libor and is cooperating with those inquiries.

"As part of the FSA's inquiries, one of Icap's interdealer broker subsidiaries has been notified that it is the subject of an FSA investigation. The investigation is confidential, accordingly no further comment will be made at this stage."

A source close to Icap told IBTimes UK at the time that the contents of the March 2012 memo are "broadly correct but it is not new news. Nothing has changed for the brokerage since last year and everyone around the market knows that ICAP has been talking to agencies and regulators and have been giving them full disclosure for some time."

'Wash Trades'

In February, Icap's Spencer declared that the group did not find "wash trades," used by banks to reward brokers for their help in manipulate key interbank lending rates, in a bid to distance itself from the Libor rigging scandal.

Spencer told investors: "We haven't found any wash trades that we've been involved in."

Wash trades is the name given to the practice of banks creating fake trades to pay brokers through commissions.

Spencer added that the interdealer broker was already conducting an internal probe into whether any attempts to manipulate key interbank lending rates had occurred.

The group was sharing relevant information with the UK's FCA, he said.

ICAP's declaration follows growing speculation over who colluded with the Royal Bank of Scotland (RBS).

The US Commodity Futures Trading Commission, the Department of Justice and the FSA printed transcripts that "uncovered wrongdoing on the part of 21 RBS employees, predominantly in relation to the setting of the bank's yen and Swiss franc Libor submissions".

It also included sections that revealed RBS collusion with interdealer brokers and an RBS yen trader engaged in wash trades to compensate brokers.