The London Interbank Exchange Rate (Libor) scandal has claimed another victim, ICAP, with further fines levied and criminal charges brought against 3 former employees. ICAP was founded by Michael Spencer, a former treasurer of Britain’s Conservative party. ICAP has gone on to become one of the world’s largest brokers of trades between banks. Libor is a mechanism used to establish borrowing costs on a daily basis, in London, and affects trillions of Dollars in contracts around the world.
ICAP has been fined £55 million by the UK’s Financial Conduct Authority (£14 million) and the US Commodity Futures Trading Commission (£41 million) for fixing rates related to Yen Libor. It is alleged that a senior UBS Yen trader asked ICAP’s brokers for their help with rates fixes more than 400 times. Traders working for such financial institutions are supposedly highly intelligent individuals, so it must have been obvious to many people for a very long time that such manipulations were fraudulent and criminal.
The three ICAP employees face charges of one count of conspiracy to commit wire fraud and two counts of wire fraud in the USA. If convicted, they could face 30 years imprisonment on each charge. A spokesman for the US Department of Justice, Scott Hammond, said: "In exchange for bigger bonus checks, the three defendants undermined financial markets around the world by compromising the integrity of globally used interest rate benchmarks"
In a statement, Mr Spencer remarked that the conduct of the three, who no longer work for ICAP was “inexcusable” – quite an understatement in the circumstances – and that the firm had cooperated with authorities during the investigation. “We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate Yen Libor. Their conduct contravenes all that ICAP stands for. There were no findings that any senior management were involved in this matter nor that the firm engaged in deliberate misconduct,” he said. Other staff implicated in the affair had been disciplined or dismissed.
If the leaders of the four financial institutions now fined for their unscrupulous (let’s be generous) behaviour are to be believed, no senior management was aware of the manipulations being carried out by their staff.