The Things Traders Say, Lloyds Edition
By now, DealBook readers know the drill: A major bank reaches a settlement with United States and British authorities over allegations that its employees conspired to manipulate the benchmark rates known as the London interbank offered rate, or Libor, and transcripts of incriminating conversations among traders and rate setters are released. What emerges are often aggressive and vulgar exchanges, at times in a London argot. It can sound like something from a Martin Amis novel or a Guy Ritchie movie.
The latest global bank to settle is Lloyds Banking Group of Britain. Here are some of the highlights of communications released by regulators on Monday.
The Financial Conduct Authority of Britain says there was a culture on the bank's money market desks of 'seeking to take a financial advantage wherever possible.'
For example on 19 July 2007 when a Lloyds manager was informed by a Lloyds trader about a request made to another Lloyds trader for a low [yen] Libor, the Lloyds trader commented that 'every little helps ... It's like Tescos.' The Lloyds manager replied, 'Absolutely, every little helps.'
As an example of a request for a skewed Libor submission, regulators noted this March 31, 2009 exchange:
Former HBOS Sterling Submitter: [. . .] I was just going to say, I am receiving on 3s LIBOR today on a couple on - on a big reset on about 2 and a half yards and I am receiving tomorrow on 5 yards, so on the LIBOR front obviously I don't know if you have got anything contrary to that, but if you haven't the firmer the better please.
Lloyds TSB Sterling Submitter: The higher the better.
Former HBOS Sterling Submitter: Yes please.
Lloyds TSB Sterling Submitter: Oh mate, I have always got loads of loans going out at the end of the month so I always try and fix it higher, so. Trouble is mate they keep calling it [expletive] lower, I can't work out why it is [expletive] going down all the time. [. . .] I mean we put 67 in yesterday, I will leave it at 67 and I won't go any lower, right?
Former HBOS Sterling Submitter: Yeah.
On July 27, 2007, a submitter to the yen Libor from the Dutch bank Rabobank had this exchange with his Lloyds counterpart:
Rabobank Yen Submitter: morning skip ... my little ... [racial epithet redacted] friend in Tokyo wants a high 1m fix from me today. ... am going to set .37 - just for your info sir
Lloyds TSB Yen Submitter: that suits mate as got some month end fixings so happy to ablige..rubbery jubbery...
In another exchange, a Yen Libor submitter and a former submitter at the Dutch bank Rabobank who traded money-markets and derivatives products had an agreement to submit Yen Libor contributions that benefited their respective trading positions:
For example, on July 28, 2006, the Rabobank submitter wrote to the Yen Libor submitter: 'morning skipper.....will be setting an obscenely high 1m again today ... poss 38 just fyi.' The Yen Libor submitter responded: '(K) ... oh dear..my poor customers. ... hehehe!! manual input libors again today then!!!!' Both banks' submissions on July 28 moved up one basis point, from 0.37 to 0.38.
On Sept. 21, 2006, a Lloyds trader and a broker discussed in a phone call taking positions in forward rate agreements to force the Libor up over a tick and a half' to make them profitable. As the broker explained to another trader the previous month:
'I'll have [bank] there as well ... because that's what you want. You don't want the market to know what you're [expletive] doing.'
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