* BoE Governor says regulator to assess further action
* FCA finds serious abuse of government liquidity scheme
* Fined 105 mln stg by UK Financial Conduct Authority
* Fined $105 million by U.S. CFTC, $86 mln by DoJ
* Bank of England says Lloyds behaviour 'clearly unlawful'
(Adds comment from BoE Governor, lawmaker, regulator)
By Matt Scuffham and Huw Jones
LONDON, July 28 Lloyds Banking Group
could face further punishment after agreeing to pay fines
totalling $370 million for its part in a global interest rate
rigging scandal and for attempting to manipulate fees for a
government lending scheme to help banks.
The settlement is the seventh joint penalty handed out by
American and British regulators in connection with the attempted
manipulation of the London interbank offered rate, or Libor, and
other similar benchmarks used to price around $450 trillion of
financial products worldwide.
But it is the first penalty for attempting to fix so-called
"repo" rates to reduce fees for a taxpayer-backed scheme set up
by the Bank of England to support British banks during the 2008
This special liquidity scheme (SLS), launched in 2008, was
an attempt to free up banks' balance sheets and boost confidence
in the financial system. It enabled banks to exchange
hard-to-trade mortgage assets for government bills.
Bank of England Governor Mark Carney said in a July 15
letter to Lloyds' chairman Norman Blackwell the attempted
manipulation could lead to criminal action against those
"Such manipulation is highly reprehensible, clearly unlawful
and may amount to criminal conduct on the part of the
individuals involved," Carney wrote.
He said Britain's financial regulator would consider whether
further action should be taken against Lloyds or the individuals
involved. Any criminal action against individuals would be taken
by Britain's Serious Fraud Office, which declined to comment.
Britain's Financial Conduct Authority said the abuse of the
SLS had been a novel feature of Lloyds' case.
"Colluding to benefit the firms (Lloyds and Bank of
Scotland) at the expense, ultimately, of the UK taxpayer was
unacceptable," Tracey McDermott, the FCA's director of
enforcement and financial crime, said.
The Bank of England said Lloyds, the biggest user of the
SLS fund, has paid it 7.8 million pounds in compensation for the
reduction on the amount of fees it received as a result.
The FCA fined Lloyds 105 million pounds, two-thirds of which
related to attempted manipulation of the SLS scheme through the
fixing of the UK's repo rate.
"It is really alarming," Mark Garnier, a Conservative
lawmaker who sits on parliament's Treasury Select Committee,
said. "This is, on the face of it, a deliberate action to
defraud the taxpayer. We will need to look at what exactly has
been going on. People will be very angry about it and rightly
Lloyds' chairman Blackwell, responding to Carney in a letter
on July 16, said: "This was truly shocking conduct, undertaken
when the bank was on a lifeline of public support."
Lloyds was also fined $105 million by the U.S. Commodity
Futures Trading Commission and $86 million fine by the U.S.
Department of Justice for attempting to fix the Libor rate for
yen, sterling and the U.S. dollar.
The DoJ entered into a deferred prosecution agreement with
Lloyds, holding off on criminal wire fraud charges in exchange
for Lloyds continuing to cooperate with its enquiries.
The FCA found that Bank of Scotland, which Lloyds later
acquired, manipulated Libor submissions as a result of at least
two management directives in September and October 2008 to avoid
negative media comment and alter market perceptions of its
It said that in September 2008, just after the collapse of
Lehman Brothers sparked a global market meltdown, a manager
instructed a trader to lower dollar Libor submissions.
"I've been pressured by senior management to bring my rates
down into line with everyone else," a third trader said.
The FCA said there had been routine manipulation of sterling
Libor submissions to benefit money market trading positions
between September 2006 and June 2009.
Emails uncovered by the FCA showed traders seeking to peg
Libor quotes to "suit the books".
For example, on July 19, 2007 when a Lloyds manager was
informed by a Lloyds trader about a request made to another
Lloyds trader for a low rate, the trader commented: "Every
little helps... It's like Tesco's", repeating an advertising
slogan used by Britain's biggest retailer.
The Lloyds manager replied: "Absolutely, every little
Lloyds was rescued by a 20.5-billion-pound government
bailout during the financial crisis. Taxpayers still hold a 25
percent stake in the bank five years later.
Lloyds' settlement follows British rivals Barclays
and Royal Bank of Scotland, which agreed to pay fines of
$453 million and $612 million respectively in 2012 and 2013.
The FCA said sixteen individuals at Lloyds, seven of them
managers, were directly involved in or aware of the various
forms of Libor manipulation, including one manager who was also
involved in the repo rate misconduct.
Shares in Lloyds were unchanged at 74.8 pence.
($1 = 0.5884 British Pounds)
(Additional reporting by Aruna Viswanatha and Jonathan Leff in
Washington and William James, William Schomberg, Clare Hutchison
and Sudip Kar-Gupta in London; Editing by Tom Pfeiffer and Jane