Barclays Libor training should have been better, boss tells court

LONDON (Reuters) - Barclays BARC.L should have given its traders more training on Libor and tighter rules on their communications, a senior executive at the British bank told the trial of five former bankers charged with manipulating the benchmark.

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Harry Harrison, the co-head of Barclays’ non-core division, told the London court on Tuesday that he had learnt during on-the-job training about the importance of setting Libor benchmark interest rates independently from a bank’s commercial interests.

Harrison said he expected his colleagues to have been equally aware of this distinction, although Barclays should have provided more formal training on the issue and been clearer about what was acceptable in their conversations.

Jay Merchant, Alex Pabon, Jonathan Mathew, Stylianos Contogoulas and ‎Ryan Reich have each pleaded not guilty to one charge of conspiracy to defraud by manipulating Libor between 2005 and 2007, in the third trial of individuals accused of rigging the ‎London interbank offered rate, a benchmark for trillions of dollars of financial contracts and household loans.

Harrison, a witness for the prosecution, said he had been unaware that New York traders had asked London colleagues to submit rates that would benefit their trading positions, the central allegation made by Britain’s Serious Fraud Office.

He did, however, say there was a “grey area” when traders could have told Libor submitters of their trading positions but did not necessarily ask them to submit rates to reflect them.

“I don’t recall, but it is possible,” Harrison said.

“We should have been more prescriptive about the conversations. I wasn’t aware of any requests for specific rates,” he told the court.

Harrison joined Barclays in London as a graduate trainee in 1989 and moved to New York in 2003 as global head of U.S. Rates trading and when he wasn’t travelling, he would walk around the trading floor to check traders’ risk positions.

He said communication was encouraged in part by banning a London practice of creating walls of screens by setting them up on top of each other ‎and by asking dealers orally about their trading positions.

But during cross-examination by defence lawyers, Harrison denied ‎that this would necessarily include a conversation about whether traders were trying to manage risk by contacting the London cash desk to ask for favourable Libor rates.

Defence lawyers, who said there had been open and frequent Libor requests by traders who indirectly reported to him during the period, asked whether he was maintaining that no trader had ever told him about contact with London colleagues about adjusting Libor settings, Harrison said: “That is correct.”

The court heard how Barclays traders also tried to influence Libor rates at other banks. Harrison described such communication as “very inappropriate” which, had it been drawn to his attention at the time “would have been a compliance matter” and resulted in questions being asked.

The prosecution told the court on April 7 that Merchant alleged in SFO interviews in March 2014 that Barclays’ bosses, including Harrison, had known of and condoned the practice of sending Libor requests to London rate submitters.

Barclays declined to comment.

The trial is scheduled to last three months.

Editing by Alexander Smith