* UK watchdog issues first ever warning notices
* Lawyer says move to show regulator active in Libor case
* ICE starts work as new administrator for Libor
By Huw Jones
LONDON, Feb 3 Britain's financial watchdog has
issued its first warning notices of proposed action against two
bankers for their part in alleged manipulation of benchmark
The Financial Conduct Authority (FCA) did not name the
people, stating only that it gave a warning notice to a
submitter of benchmark interest rates for failings over a period
of more than two years, and another warning to a manager at a
bank for failings over more than three years.
The warnings, issued in November but only published on
Monday, relate to the London Interbank Offered Rate or Libor and
its continental European counterpart Euribor.
A number of banks have been fined $6 billion by European,
British and U.S. regulators for manipulating Libor and Euribor,
which are used to price around $400 trillion worth of products
worldwide, from derivatives to home loans.
The rates are compiled by banks submitting quotes of rates
they believe they could borrow money at from another bank.
Banks were found to have rigged them to show the bank was
not in financial difficulty during the financial crisis or to
make derivatives contracts based on them profitable.
This is the first time the FCA has issued warnings since it
was given the power to do so. In the past, the UK financial
watchdog would only make its enforcement proceedings public once
an individual or company was punished.
The FCA's ability to issue early warnings has raised
concerns that a firm or individual would be permanently
tarnished even if a case were subsequently dropped.
Rob Moulton, a financial services partner at law firm
Ashurst, said the aim was to warn the public early of any
potential problems with financial products.
Moulton said the case involving the two bankers was
different as it was not directly related to a consumer product.
"It looks to me that the only benefit to saying these
warning notices have been issued is to the regulator, that they
are being active," Moulton said.
"The use of this power is for the pursuit of the regulatory
agenda rather than for public protection," Moulton added.
Regulators in Britain have been criticised by members of
parliament for being slow to bring individuals to book for their
part in rigging Libor as regulatory investigations have widened
to include possible manipulation of currency benchmarks.
The FCA is likely to take many months before it reaches
final decisions on the two individuals, who can challenge them
in an independent FCA committee and later in court.
The FCA accused the first individual, a manager at a bank,
of being personally aware and condoning traders making requests
to submitters to manipulate submissions.
The watchdog accused the manager of facilitating others'
attempts to manipulate interest rate benchmarks and of being
aware of the conflict of interest in certain submitters also
trading derivative products referenced to an interest rate
It accused the second individual of making interest rate
benchmark submissions which took into account requests made by
traders to benefit their positions.
The second individual is also accused of colluding with an
interdealer broker and with traders at another bank that
submitted quotes for compiling interest rate benchmarks.
The second individual also took into account interest rate
derivative positions on the bank's trading book for which the
individual was responsible when it came to making submissions,
the watchdog said.
Separately, Britain's finance ministry said international
exchange ICE became the independent administrator for
Libor on Monday after the British Bankers' Association was
stripped of the role because some of its members have been fined
for rigging the benchmark.
"Reforming Libor and rebuilding the reputation of this
crucial global benchmark is crucial to restoring people's trust
in financial services," junior finance minister Sajid Javid