Libor Fixing Scandal: Lloyds Charged £218m for Market Manipulation

US and UK authorities have charged Lloyds Banking Group £218m in total for rate rigging, attempted market manipulation and false reporting, related to one of the world's most important interbank lending rates – Libor.

Three regulators: US Commodity Futures and Trading Commission (CFTC), Department of Justice (DoJ) and the Financial Conduct Authority (FCA), issued separate statements involving Lloyds and other subsidiaries in a number of failures related to Libor and other benchmark lending rates.

This is the seventh Libor fixing settlement involving banks and a combination of US and UK regulators since 2012.

Libor is a lending rate that is set by a panel of banks, which directly influences the value of trillions of dollars of financial deals.

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.

The US CFTC and DoJ Charge

The US regulator said that it has slapped parent group Lloyds and subsidiary Lloyds Bank, formerly known as Lloyds TSB. The CFTC 'order' will settle charges for acts of false reporting and attempted manipulation of Libor for Sterling, US Dollar, and Yen "committed by employees of Lloyds TSB and HBOS, which was acquired by Lloyds Banking Group in January 2009".

The watchdog said Lloyds TSB was successful in its manipulation of Sterling Libor and Yen Libor while, at other times, Lloyds TSB aided and abetted the attempts of derivatives traders at Rabobank to manipulate Yen Libor.

The CFTC has subsequently ordered Lloyds Banking Group and Lloyds Bank to pay a $105m (£61.7m, €78.1m) civil monetary penalty, cease and desist from violations of the Commodity Exchange Act, and adhere to specific undertakings to ensure the integrity of Libor submissions in the future.

"By today's action, Lloyds is being held accountable for serious misconduct," said Aitan Goelman, CFTC Director of Enforcement. "The CFTC remains committed to taking all actions necessary to ensure the integrity of the markets we oversee."

The DoJ also slammed Lloyds with a $86m settlement.

UK's FCA Charge

Meanwhile, Britain's watchdog FCA said in a statement that it has fined Lloyds Bank and Bank of Scotland (BoS), £105m for "serious misconduct relating to the Special Liquidity Scheme (SLS), the Repo Rate benchmark and Libor".

"The firms were a significant beneficiary of financial assistance from the Bank of England through the SLS. Colluding to benefit the firms at the expense, ultimately, of the UK taxpayer was unacceptable. This falls well short of the standards the FCA and the market is entitled to expect from regulated firms," said Tracey McDermott, the FCA's director of enforcement and financial crime.

"The abuse of the SLS is a novel feature of this case but the underlying conduct and the underlying failings - to identify, mitigate and monitor for obvious risks - are not new.

"If trust in financial services is to be restored then market participants need to ensure they are learning the lessons from, and avoiding the mistakes of, their peers. Our enforcement actions are an important source of information to help them do this," she said.