LONDON (Reuters) - “Done ... for you big boy,” read a message sent by a Barclays banker to one of the lender’s traders, who had asked him to fix a key lending rate artificially low.
“Dude, I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger,” a trader from another firm emailed a banker at Barclays, showing his thanks for the rate set artificially low.
UK-based Barclays has agreed to pay $453 million in fines to UK and U.S. regulators to settle its part of an investigation into whether banks manipulated the London Interbank Lending Rate, know as Libor.
Investigators were helped by extensive emails and other messages about Libor, a set of benchmarks designed to indicate the rate at which banks estimate they are able to lend to each other. Libor is used to set corporate and personal borrowing rates worldwide.
Communications released by authorities on Wednesday showed Barclays traders calling each other “superstar” and with little concern for covering their tracks as they urged colleagues responsible for submitting Barclays’ Libor rates to try and influence final prices.
Requests came in such as: “We need a really low 3m fix, it could potentially cost a fortune. Would really appreciate any help.”
And: “Your annoying colleague again ... Would love to get a high one month. Also if poss a low three month ... if poss ... thanks.”
Traders made their requests in person, via email and through electronic “chats” over an instant messaging system.
On a few occasions, some traders even made entries in electronic calendars to remind themselves what requests to make of Barclays’ Libor submitters the next day.
One trader would shout across the desk to make sure other traders had no conflicting preference to ask the Libor submitters.
“The traders were barking orders like they were at a fast food drive-through and the submitters were so accommodating that they might as well have said, ‘do you want fries with that’,” said Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, which led the settlement agreement.
Some 257 requests were made to rate submitters from at least 14 Barclays derivatives traders over four years. Traders at other banks also tried to influence Barclays’ rate, while Barclays’ traders put pressure on the rates offered by others.
Most of the world’s biggest banks are under investigation as regulators from Europe, North America and Japan attempt to prove banks rigged rates. Barclays is the first to settle.
“This is the way you pull off deals like this chicken, don’t talk about it too much, 2 months of preparation... the trick is you do not do this alone ... this is between you and me but really don’t tell ANYBODY,” a Barclays trader told a trader at another bank.
Investigators said Barclays derivatives traders got the bank to submit inaccurate rates between 2005 and 2008 so they could profit. The bank also submitted artificially low rates from September 2007 to May 2009 to ease fears it faced funding problems during the financial crisis.
Judging by the messages, Barclays was not alone in having an interest in lowering their submitted rates during the crisis to avoid signaling to markets their distress.
On one occasion, a manager said if Barclays submitted its correct rate, “It’s going to cause a shit storm,” and the bank submitted a lower rate.
But the bank’s treasury staff were beginning to become uneasy. In late 2007, Barclays told the UK Financial Services Authority and the British Bankers’ Association, the trade body under whose auspices Libor is set, of its concerns that rivals were setting rates too low.
Months later, a senior Barclays treasury manager called the BBA and warned them that rates were not accurate, but that Barclays was not the worst offender.
“We’re clean, but we’re dirty clean, rather than clean-clean,” he said.
“No-one’s clean-clean,” the BBA representative responded.
Additional reporting by Alexandra Alper in New York, and Sarah White and Kylie MacLellan in London; Editing by Tim Dobbyn