Last Wave on Libor: CFTC Likely to Charge Multiple Banks for Rate Rigging
February 12 2016 - 12:45PM
Dow Jones News
By Jean Eaglesham and David Enrich
American banks have so far escaped the billions of dollars in
fines that have been levied by U.S. and British regulators leading
a global seven-year probe into interest-rate rigging. That is
likely to change.
The U.S. Commodity Futures Trading Commission and the U.K.
Financial Conduct Authority are working on a final round of civil
charges against several banks for alleged manipulation of a
benchmark underpinning interest rates on trillions of dollars of
financial contracts world-wide, according to people close to the
probe.
The firms being targeted by the regulators include Citigroup
Inc., the nation's third-largest bank, as well as London-based HSBC
Holdings PLC, the people close to the investigation said.
J.P. Morgan Chase & Co., the biggest U.S. bank by assets, is
still being investigated by the CFTC although this may not lead to
enforcement action, the people said. The U.K. regulator dropped its
rate-rigging probe into J.P. Morgan, the bank said in a filing last
year.
Representatives of the banks declined to comment.
The regulators' plan for a last round of cases hasn't been
derailed by last month's acquittal of six former brokers on
criminal charges of trying to rig the benchmark at the heart of the
probe, called the London interbank offered rate, or Libor,
according to people close to the probe.
A London jury rejected accusations that the men conspired with
Tom Hayes, a former trader at UBS Group AG and Citigroup who was
last year convicted and imprisoned for masterminding an
international scheme to skew Libor.
The acquittal, while a significant setback for U.K. prosecutors,
doesn't undermine the civil cases that will likely be brought in
coming months against a handful of banks, alleging their employees
were involved in rate rigging, according to people close to the
investigation.
That trial turned on specific facts about the conduct of the six
men, regulatory officials said.
The sprawling Libor probe, started by the CFTC in spring 2008
following a series of Page One articles in The Wall Street Journal,
amassed a trove of emails, instant messages and other documents
indicating traders at banks in the U.S., Europe and Asia tried to
manipulate Libor to boost their profits.
About a dozen financial firms have settled charges of Libor
rigging, many of them entering criminal guilty pleas. British and
U.S. authorities have imposed sanctions totaling more than $6
billion.
The likely cases against the banks aren't expected for several
months, according to the people close to the probe, but they do not
expect any of the cases to result in payments by banks on the scale
of the landmark Libor cases, including the record $2.5 billion
penalty paid last year by Deutsche Bank AG to U.S. and British
authorities. The German bank at the time issued a statement
apologizing for its misconduct and saying it had taken steps to
improve its internal controls to avoid similar problems in the
future.
The banks in the final wave of Libor settlements may also avoid
criminal charges from U.S. prosecutors, according to people
familiar with the probe, in contrast to most of the firms that have
already settled.
The Justice Department has told Citigroup it has "decided to
decline prosecution with respect to Libor," the bank said in a
regulatory filing. While the Justice Department is still
investigating at least some of the banks under scrutiny by the
CFTC, including J.P. Morgan, it is unclear if it will bring any
further cases, according to a person close to the probe.
The completion of the Libor probes would mark the end of what
has been a very expensive chapter for some of the world's biggest
banks.
Regulators' discovery that banks had been manipulating interest
rates led to scrutiny of benchmarks in a diverse mix of markets,
triggering a series of global investigations that are still
ongoing.
The most costly spinoff probe so far has been the alleged
rigging of the foreign-currency market, which led to a $4.3 billion
pact with six banks in 2014 by the CFTC, FCA and other regulators.
Citigroup and J.P. Morgan bore the brunt of the settlement,
agreeing to pay more than $1 billion each. They neither admitted
nor denied wrongdoing in the settlements.
Aruna Viswanatha contributed to this article.
Write to Jean Eaglesham at jean.eaglesham@wsj.com and David
Enrich at david.enrich@wsj.com
(END) Dow Jones Newswires
February 12, 2016 13:30 ET (18:30 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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