Timeline: The rate-fixing scandal

Al Jazeera timeline of the international Libor scandal that exposed extensive rate-rigging across the financial sector.

Barclays Bank Fined Over Libor Investigations
Barclays was fined $454m for manipulating the Libor lending rate, triggering much wider investigations [GALLO/GETTY]

2005: Evidence shows Barclays tried to control dollar Libor and Euribor rates at the request of its derivatives traders. The London Interbank Offered Rate, known as Libor, is a key barometers in the global financial system.

According to a report by the Financial Services Authorities (PDF) between from January 2005 to June 2009, Barclays derivatives traders made a total of 257 requests to fix Libor and Euribor rates.

2007: As the British bank Northen Rock collapsed, Barclays manipulated Libor submissions to give a healthier picture of the bank’s credit quality and its ability to raise funds.

Barclays’ Libor submissions were at the higher end of the range of contributing banks, and prompted media and marjet speculation about the true picture of the bank’s risk and credit profile.

August 2007: The New York Fed received emails that Libor submissions were being set low by banks.

November 2007: a senior submitter at Barclays wrote in an internal email that “Libors are not reflecting the true cost of money”, according to the FSA.

December 2007: A Barclays employee told the New York Fed in a phone call (PDF) that Libor rates were being fixed at a level that was low.

April 2008: The WSJ published a report questioning the Libor integrity. “One of the most important barometers of the world’s financial health could be sending false signals,” the paper wrote.

In late April officials from the New York Federal Reserve Bank met to determine what steps might be taken to address the problems with Libor, and notified other US agencies.

The New York Fed officials also met with British Bankers Association officials to express their concerns and establish in greater depth the flaws in the Libor-setting process.

 Diamond resigns from scandal-hit Barclays
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June 2008: Tim Geithner, who was the head of the New York Fed at the time, sent Bank of England governor Sir Mervyn King, a list of proposals to to try to tackle Libor’s credibility problem.

Proposals included the need “to eliminate the incentive to misreport” by protecting the identity of the banks that submitted the highest and lowest rates. Sir Mervyn King passed the recommendations onto the BBA as well.

The BBA published a consultation paper seeking comments about proposals to modify Libor. “The BBA proposes to explore options for avoiding the stigma whilst maintaining transparency,” it said. Barclays contributed comments but avoided mentioning its own rate submissions.

October 2008: The UK government announces plans to pump billions of pounds of taxpayers’ money into three major banks, effectively part-nationalising Royal Bank of Scotland (RBS), Lloyds TSB and HBOS.

A week later, on 21 and 22 October, Paul Tucker, deputy governer of the Bank of England and senior government official Sir Jeremy Heywood discussed why Libor in the UK was not falling as fast as in the US, despite government action. Sir Jeremy also asked why Barclays’ borrowing costs were so high. “A lot of speculation in the market over what they are up to,” he says in an email.

On 29 October Paul Tucker and Bob Diamond – head of Barclays’ investment bank at the time – speak on the phone. According to Mr Diamond’s account of the conversation, emailed to colleagues the next day, Mr Tucker said senior Whitehall officials wanted to know why Barclays was “always at the top end of Libor pricing”.

According to Barclays’ chief executive, Tucker said the rates “did not always need to be the case that we appeared as high as we have recently”. Tucker later said that gave the “wrong impression” of their conversation and said he did not encourage Barclays to manipulate its Libor submissions.

Following this discussion with the Bank of England, Barclays instructed Libor submitters to lower the rate to be “within the pack”.

2009: The BBA release guidelines for all contributor banks on setting Libor rates in the same manner. Barclays made no changes at all.

2010: In June, Barclays circulated an email to submitters that set out “fundamental rules” that required them, for example, to report to compliance any attempts to influence Libor submissions either externally or internally. It also prohibited communication with external traders “that could be be seen as an attempt to agree on or impact Libor levels”.

2011: Royal Bank of Scotland sacked four people for their alleged roles in the Libor-fixing scandal.

June 27: Barclays paid $454m fine for manipulating interest rates, including with (Libor) and Barclays gave false information to create an illusion of financial health as the financial crisis kicked off.

Bob Diamond, Barclays’ CEO, apologised and promised that himself and three top executives would surrender their bonuses for 2012.                

June 28: Leader of the opposition party Ed Miliband calls for a criminal investigation into Barclays, arguing that the case was yet another case of the rich and powerful believing they were “above the law”. The British Treasury examines the possibility of strengthening criminal sanctions for those accused of abusing markets. Following the fine against Barclays, the Financial Services Authority (FSA) opens investigations into HSBC and the Royal Bank of Scotland (RBS).

June 29: There was fresh criticism for major banks, including Barclays, RBS, Lloyds and HSBC – from the FSA. The authority found “serious failings” in the way the banks treated their smaller clients.

Sir Mervyn King, the Bank of England governor, called for a “real change in culture”.

July 1: Vince Cable, the UK business secretary, gives his support to calls for a criminal investigation into those accused of involvement in the rate-rigging scandal.

July 2: David Cameron, the British prime minister, announces a parliamentary inquiry in the alleged rates manipulation.

Marcus Aguis, the chairman of Barclays, steps down. Diamond said in a letter to staff that he would “get to the bottom” of what happened.

July 3: With the political pressure continuing unabated, Diamond resigns. Aguis is reappointed to lead the search for Diamond’s replacement.

In the afternoon, Barclays’ chief operating officer, Jerry del Missier, steps down. Barclays releases documents showing their attempts to alert regulators to Libor rigging and Diamond’s damning memo of the conversation with Tucker.

July 4: Diamond faced a three-hour grilling frothe UK Treasury selct committee in the inquiry over the scandal, during which he described the behaviour of those responsible as “reprehensible” and said it had made him physically ill.

July 5: Credit rating agency Moody’s lowered its rating outlook on Barclays from stable to negative.

June 6: British Serious Fraud Office launches a criminal investigation into Libor manipulation.

June 9: Paul Tucker gives evidence iinsisting he had not leant on Barclays to lower its submissions, nor had he been asked to do so by the government.

July 14: The New York Times reports that the US justice department is preparing a criminal investigation into major banks and individual allegedly involved in interest rate manipulation.

July 16: The Senate Permanent Subcommittee on Investigations releases an indepth report slamming HSBC for having allowed Mexican drug cartels, amongst others, to launder billions through its US operations.

In the UK parliamentary inquiry into the Libor scandal, a leading Barclays executive says Diamond instructed him to manipulate the bank’s interest rate submissions.

Barclays’ Aguis writes a memo to staff, published in the International Business Times, arguing that the dodgy practices followed by Barclays were pervasive across the financial sector:

“As other banks settle with authorities and their details become public and various governments’ inquiries shed more light, our situation will eventually be put in perspective.”

With inputs from Yasmine Ryan and Hasan Patel

Source: Al Jazeera