Libor (London interbank offered rate), is meant to represent how much banks pay to borrow from one another. It is also a benchmark for at least US$550 trillion worth of contracts spanning interest rate derivatives to residential mortgages. A scandal erupted after banks were found to be rigging the system. Barclays was fined US$453 million by global regulators in June 2012 for manipulating Libor, and UBS was hit with a US$1.5 billion bill in December 2012. In February 2013, RBS was fined US$612 million to settle US and UK regulatory charges of misconduct, manipulation, attempted manipulation and false reporting of yen, Swiss franc and dollar-denominated Libor.
UK prosecutor promises hefty evidence in first Libor fixing case
Authorities interviewing traders in connection with probe into how crucial benchmark rates such as Libor (London interbank offered rate) were routinely rigged
British prosecutors say they have extensive evidence against former trader Tom Hayes, the first suspect to come to court following a global investigation into the suspected rigging of interbank lending rates.
“To describe (the evidence) as voluminous would be rather an understatement,” Mukul Chawla, leading counsel for Britain’s Serious Fraud Office (SFO), told a preliminary court hearing.
Judge Anthony Leonard told lawyers representing the SFO to serve their prosecution papers by Sept. 30 at the latest. Hayes, a Briton charged last month with conspiracy to defraud, spoke only to confirm his name. The former UBS and Citigroup trader did not enter a plea.
Authorities have been interviewing a string of traders in connection with a sprawling investigation into how crucial benchmark rates such as Libor (London interbank offered rate), against which trillions of dollars of loans are priced, were routinely rigged.
However Hayes, who allegedly manipulated Libor benchmark interest rates with staff from 10 leading banks and brokers over four years, is the first suspect to be charged by both UK and US prosecutors and brought before a UK court in a inquiry stretching from North America to Asia.
The next hearing at which the 33-year-old could submit a plea - a so-called Plea and Case Management Hearing (PCMH) - has been provisionally set for the week commencing October 21. In the interim, Hayes remains on bail.
The Libor scandal, which has sparked public and political outrage and laid bare the failings of authorities and bank bosses, has to date seen UK and US regulators fine three banks a total of US$2.6 billion (HK$20.2 billion). Prosecutors and police have charged two men, including Hayes.
Hayes joined Swiss bank UBS in Tokyo in 2006, becoming a senior trader of interest-rate derivatives indexed to yen-denominated Libor. In late 2009, he left UBS to join Citigroup in Tokyo. He left the US bank less than a year later.
Prosecutors allege that together with employees from institutions including UBS, Citigroup, Royal Bank of Scotland, Deutsche Bank, JPMorgan Chase, HSBC, Rabobank and interdealer brokers ICAP, Tullett Prebon and RP Martin, Hayes conspired to defraud.
Charges against him include conspiring with others “to defraud in dishonestly seeking to manipulate yen London interbank offered rates and other interbank offered rates ... with the intention that the economic interests of others would be prejudiced and/or to make personal gain for themselves or another.”
The maximum UK sentence for conspiracy to defraud is 10 years.