Libor Fixing Scandal: FCA Issues 2 Warning Notices to Rate Submitter and Bank Manager

The Financial Conduct Authority has issued two Warning Notice Statements, for the first time since it was given the power to do so, to two bankers related to the manipulation of key interbank lending rates.

The FCA slapped one submitter at a bank with a Warning Notice Statement, after they had knowingly broken the rules by presenting "significant failings in relation to an interest rate benchmark," over a period of more than two years.

A second individual was hit with a similar warning as the regulator said that over a period of more than three years, the individual, who was a manager at a bank, also knowingly broke the rules in the rate setting process.

Although the FCA unveiled the notices, it said it would make no further comment on the matter.

Libor valuations 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.

This is the first time FCA has issued a Warning Notice Statement since it was given the power to do so by the Financial Services Act 2012.

The point of Warning Notices is to provide and promote early transparency of enforcement proceedings.

Within the Warning Notice notifications, the FCA said that the bank manager was responsible for the oversight and supervision of the bank's submitters and some of the bank's traders and failed to manage appropriately the business area for which he was responsible.

"He instead facilitated others' attempts to manipulate interest rate benchmark submissions; was aware of the absence of systems, controls or policies governing the procedure for making interest rate benchmark submissions at the bank, and took no steps to address this," said the FCA.

"He was also aware of the conflict of interest in certain submitters also trading derivative products referenced to an interest rate benchmark. The individual allowed this to continue and took no steps to mitigate the risks that it posed."

Meanwhile, in relation to the rate submitter that the FCA issued a Warning Notice to, it said that the individual made benchmark submissions which took into account requests made by traders to benefit their positions.

"The individual colluded with an interdealer broker acting on behalf of a trader from another bank, by making interest rate benchmark submissions which took into account a request made by that broker," said the FCA.

"They also colluded directly with traders at another panel bank, both by making interest rate benchmark submissions which took into account requests made by them, and by making requests to that other panel bank on behalf of traders at his bank, in an attempt to influence their interest rate benchmark submissions."