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Barclays Fined £59.5M By Fsa


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HOLA441

That's probably a question for another day.......

What I can't quite understand is can one bank manipulate Libor by itself ? Barclays are taking the flak at the moment but they can't have acted alone.

Which makes me think that all the major banks were at it.

Increasing Libor when credit was aplenty (pre-summer 2007) and then reducing it when the credit crunch started.

I reckon the true rate Libor was MUCH higher in October 2008 when the banking world teetered on the edge.

I do wonder if Barclays have been responsible for single handedly saving Browns 'Economy'...

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HOLA442

This is not a defence of the banks, but a technical question (I voted that it's about time we started locking up some bankers - though not specifically Barclays ones).

Have they technically broken the law?

It strikes me that they publish the rate that they claim to borrow money at. This rate is interpreted by others who start to use it to base their own data on.

My question is, is this information voluntarily provided by the banks, or are they required to provide it by law?

If it is a voluntary not legal arrangement, what crime has been committed? It seems it would be largely a civil matter between banks as to whether they have been lying to each other, and those who use the data for not checking its veracity?

If we can prosecute bankers on this issue (like we bought down news international for guessing people's mobile voice-mail passwords), can we then go on to the ratings agencies for their bad rating of CDOs and other derivatives?

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HOLA443

This is not a defence of the banks, but a technical question (I voted that it's about time we started locking up some bankers - though not specifically Barclays ones).

Have they technically broken the law?

It strikes me that they publish the rate that they claim to borrow money at. This rate is interpreted by others who start to use it to base their own data on.

My question is, is this information voluntarily provided by the banks, or are they required to provide it by law?

If it is a voluntary not legal arrangement, what crime has been committed? It seems it would be largely a civil matter between banks as to whether they have been lying to each other, and those who use the data for not checking its veracity?

If we can prosecute bankers on this issue (like we bought down news international for guessing people's mobile voice-mail passwords), can we then go on to the ratings agencies for their bad rating of CDOs and other derivatives?

I would suggest if they have profited by rigging this data is it not obtaining a pecuniary advantage by deception? similarly if it was proven that the rating agencies had deliberately rated incorrectly to because of pressure from clients that is also fraudulent.

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HOLA444

Have they technically broken the law?

I don't think they've broken a specific law (i.e. one that says "thou shalt not lie about LIBOR"), but it does seem to be a clear case of fraud.

If I promise to drive you for £5 an hour + petrol, but then lie about how much I've spent on petrol, then that is fraud. If the LIBOR rate has an impact on the cost of borrowing for the customer, then I don't see how this is different.

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HOLA445

In cases like this, fines should be levied against indivuduals not companies,

Companies of this size will either shrug the fine off as inconsequentially small, or can recoup the fine from their customers by increasing charges across their customer base.

+1

I just learnt today that fines paid to the FSA are actually used to reduce the annual levy on all other financial institutions! So net-net the b4stards are collectively no worse off, whatever the censure.

They're as crooked as the devil's toes, I tell ye.

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HOLA446

This is not a defence of the banks, but a technical question (I voted that it's about time we started locking up some bankers - though not specifically Barclays ones).

Have they technically broken the law?

It strikes me that they publish the rate that they claim to borrow money at. This rate is interpreted by others who start to use it to base their own data on.

My question is, is this information voluntarily provided by the banks, or are they required to provide it by law?

If it is a voluntary not legal arrangement, what crime has been committed? It seems it would be largely a civil matter between banks as to whether they have been lying to each other, and those who use the data for not checking its veracity?

If we can prosecute bankers on this issue (like we bought down news international for guessing people's mobile voice-mail passwords), can we then go on to the ratings agencies for their bad rating of CDOs and other derivatives?

Good point. It is akin to breaking rules of the game you have agreed to play in, as opposed to not telling the truth in something legally obliged e.g. Tax return etc.

However...

It can be argued that those performing it knew they would likley benefit. They are only one submitter so they couldnt manipulate the price too much but anything no matter how small could have an effect and as such they were likely committing some form of fraud but Im not sure if the law could cover it. For a criminal prosecution you would have to prove quite a few things as Im not sure lobbying smeone to lie in a survey would get you there. The FSA dont need such a high burden of proof as a criminal case (I think)

As someone else pointed out on here. This is a terrible and immoral act and those responsible should face the music but a few more points need to be made.

The Libor fixings are nothing compared to the influence base rates have on Libor iteslf and this is rigged as a matter of lawful policy. The largest private bank, the BOE actually DICTATES the base rate let alone the downstream libor curve which is mainly itself determined by base rates plus long term credit and liquidity of banks.

The barclays mob might be able to shave a basis point or two off the libor fixing but the MPC knocked off nearly 500 basis points in a short time and told everyone in a monthly announcement that they were doing it.

Another aspect of 2008 is that most people are now pricing (collateralised derivatives at least) off an OIS curve not Libor. People dont think Libor is appropriate anymore especially as there will be a massive push to migrate most derivatives from OTC to an overnight clearer or exchange where margin should be posted daily (at least that is what should happen)

This was a fraus but most of the victims were, I imagine contained within the same game, what dictates your mortgage mainly is how much your bank can get away with charging you not how much they pay to fund it. If their funding costs driopped overnight guess how much of that profit you would likely see?

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HOLA447
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HOLA448

I don't think they've broken a specific law (i.e. one that says "thou shalt not lie about LIBOR"), but it does seem to be a clear case of fraud.

If I promise to drive you for £5 an hour + petrol, but then lie about how much I've spent on petrol, then that is fraud. If the LIBOR rate has an impact on the cost of borrowing for the customer, then I don't see how this is different.

You are probably right, though I'm not sure if banks force people to follow the libor rate.. people just do, the banks realised and thus realised they could manipulate confidence. We on HPC were guilty of this in 2007.. we followed the libors rates as a sign of bank stress, but I think even then some of us were sceptical as to whether these rates were entirely accurate (we only had the publishers word for it).

As for the petrol analogy, I think it is close, though perhaps more accurately might be someone saying "you drive me and I will pay you £5 per hour plus petrol based on your cost of petrol index". You have never given any promise concerning the fidelity between your index and the true cost of petrol, nor have you ever shown your customer how your index is derived. So you bump it up by 1 or 2 percent (and call it margin for error or some such).

Either way it is clearly dishonest. Fraudulent? probably, criminal.. I don't know. I believe criminal law surrounding fraud is designed to protect companies from individuals, not companies from companies or people from companies (I'm happy to be corrected).

It will be interesting to see how it comes out in the wash.

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HOLA449

You are probably right, though I'm not sure if banks force people to follow the libor rate.. people just do, the banks realised and thus realised they could manipulate confidence. We on HPC were guilty of this in 2007.. we followed the libors rates as a sign of bank stress, but I think even then some of us were sceptical as to whether these rates were entirely accurate (we only had the publishers word for it).

As for the petrol analogy, I think it is close, though perhaps more accurately might be someone saying "you drive me and I will pay you £5 per hour plus petrol based on your cost of petrol index". You have never given any promise concerning the fidelity between your index and the true cost of petrol, nor have you ever shown your customer how your index is derived. So you bump it up by 1 or 2 percent (and call it margin for error or some such).

Either way it is clearly dishonest. Fraudulent? probably, criminal.. I don't know. I believe criminal law surrounding fraud is designed to protect companies from individuals, not companies from companies or people from companies (I'm happy to be corrected).

It will be interesting to see how it comes out in the wash.

The US Department of Justice clearly sees it as a criminal matter. Senior staff of the DoJ's Criminal Division and the FBI are leading this investigation.

According to the DoJ, Barclays has only been granted immunity from prosecution because it cooperated fully with the investigation and gave complete disclosure.

The agreement not to prosecute does not extend to Barclays' officers or employees.

As for other firms involved in the manipulation – I get the impression that the DoJ will be coming down harder on some, and that may well involve criminal proceedings.

Remember also that this isn't just about LIBOR – Barclays and others have been caught manipulating EURIBOR too, so it remains to be seen what action the European authorities will take on this.

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HOLA4410

The US Department of Justice clearly sees it as a criminal matter. Senior staff of the DoJ's Criminal Division and the FBI are leading this investigation.

According to the DoJ, Barclays has only been granted immunity from prosecution because it cooperated fully with the investigation and gave complete disclosure.

The agreement not to prosecute does not extend to Barclays' officers or employees.

As for other firms involved in the manipulation – I get the impression that the DoJ will be coming down harder on some, and that may well involve criminal proceedings.

Remember also that this isn't just about LIBOR – Barclays and others have been caught manipulating EURIBOR too, so it remains to be seen what action the European authorities will take on this.

heres a quick definition of FRAUD

  1. Wrongful or criminal deception intended to result in financial or personal gain.
  2. A person or thing intended to deceive others, typically by unjustifiably claiming or being credited with accomplishments or qualities

I guess this case is cut and dried.

Or the Fraud Act 2006

Fraud by false representation

(1) A person is in breach of this section if he—

(a) dishonestly makes a false representation, and

(B) intends, by making the representation—

B

2 Fraud Act 2006 (c. 35)

(i) to make a gain for himself or another, or

(ii) to cause loss to another or to expose another to a risk of loss.

(2) A representation is false if—

(a) it is untrue or misleading, and

(B) the person making it knows that it is, or might be, untrue or misleading.

(3) “Representation” means any representation as to fact or law, including a

representation as to the state of mind of—

(a) the person making the representation, or

(B) any other person.

(4) A representation may be express or implied.

(5) For the purposes of this section a representation may be regarded as made if it

(or anything implying it) is submitted in any form to any system or device

designed to receive, convey or respond to communications (with or without

human intervention).

Edited by Bloo Loo
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HOLA4411

As for other firms involved in the manipulation – I get the impression that the DoJ will be coming down harder on some, and that may well involve criminal proceedings.

Remember also that this isn't just about LIBOR – Barclays and others have been caught manipulating EURIBOR too, so it remains to be seen what action the European authorities will take on this.

Teh talking heads on CNBC were giving the EURIBOR angle some yardage last night. Given the amount of political heat this has generated in the UK alone the swillers are going to struggle to sweep this one under the carpet.

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HOLA4412

The US Department of Justice clearly sees it as a criminal matter. Senior staff of the DoJ's Criminal Division and the FBI are leading this investigation.

According to the DoJ, Barclays has only been granted immunity from prosecution because it cooperated fully with the investigation and gave complete disclosure.

The agreement not to prosecute does not extend to Barclays' officers or employees.

As for other firms involved in the manipulation – I get the impression that the DoJ will be coming down harder on some, and that may well involve criminal proceedings.

Remember also that this isn't just about LIBOR – Barclays and others have been caught manipulating EURIBOR too, so it remains to be seen what action the European authorities will take on this.

Thanks FT, it does sound like Barclays will turn out to be the best of a bad bunch. I'll be interested to see whether they start targeting individuals as you hint at.. it would definitely win popular support.

heres a quick definition of FRAUD

-SNIP-

Sounds like they're guilty as hell and don't have a chance :D

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HOLA4413
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HOLA4414

Christ, this story is just MASSIVE

The lawsuits from US states to pension funds against Barclays and the other big banks have started already.

Banking is about to become the utility service it should have always been. This is the beginning of the end for banksterism and the parasitic grip it's had on the economy.

Expecting some kind of debt jubilee as a result of this.

Houseprices to soar, probably.

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HOLA4415
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HOLA4416
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HOLA4417

Christ, this story is just MASSIVE

The lawsuits from US states to pension funds against Barclays and the other big banks have started already.

Banking is about to become the utility service it should have always been. This is the beginning of the end for banksterism and the parasitic grip it's had on the economy.

Expecting some kind of debt jubilee as a result of this.

Houseprices to soar, probably.

And you thought the BP Gulf explosion was big....

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HOLA4418
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HOLA4419
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HOLA4420

heres a quick definition of FRAUD

  1. Wrongful or criminal deception intended to result in financial or personal gain.
  2. A person or thing intended to deceive others, typically by unjustifiably claiming or being credited with accomplishments or qualities

I guess this case is cut and dried.

Or the Fraud Act 2006

Fraud by false representation

(1) A person is in breach of this section if he—

(a) dishonestly makes a false representation, and

(B) intends, by making the representation—

B

2 Fraud Act 2006 (c. 35)

(i) to make a gain for himself or another, or

(ii) to cause loss to another or to expose another to a risk of loss.

(2) A representation is false if—

(a) it is untrue or misleading, and

(B) the person making it knows that it is, or might be, untrue or misleading.

(3) “Representation” means any representation as to fact or law, including a

representation as to the state of mind of—

(a) the person making the representation, or

(B) any other person.

(4) A representation may be express or implied.

(5) For the purposes of this section a representation may be regarded as made if it

(or anything implying it) is submitted in any form to any system or device

designed to receive, convey or respond to communications (with or without

human intervention).

Morally guilty as sin. Guilty of market abuse in fsa speak.

Not sure they'll nail them criminally though. It depends upon interpretation of section 3 in your comment.

Will the law decide that they misrepresented a fact ? Instinctively we'd all say yes but I'm not sure what Libor submissions actually request a bank to do?

Do the banks have to submit the truth or ate they signed up to some form of disclaimer that suggests their Libor submission is an estimate and is not the banks view etc etc

Bit like an estate agent deliberately suggesting he could market and sell your house at 50% over the odds . Not sure you could nail the lying ******* even if following advice cost you .

Another point is why didn't Barclays have a very simple check in place comparing their submission with their actual daily funding costs ?

Edited by Sir Harold m
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HOLA4421
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HOLA4422

Morally guilty as sin. Guilty of market abuse in fsa speak.

Not sure they'll nail them criminally though. It depends upon interpretation of section 3 in your comment.

Will the law decide that they misrepresented a fact ? Instinctively we'd all say yes but I'm not sure what Libor submissions actually request a bank to do?

Do the banks have to submit the truth or ate they signed up to some form of disclaimer that suggests their Libor submission is an estimate and is not the banks view etc etc

Bit like an estate agent deliberately suggesting he could market and sell your house at 50% over the odds . Not sure you could nail the lying ******* even if following advice cost you .

Another point is why didn't Barclays have a very simple check in place comparing their submission with their actual daily funding costs ?

in an environment where billions are transacted every day, and 1000ths of a percent earn thousands, you can be sure they knew exactly what was reality, and what was reported.

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HOLA4423
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HOLA4424

The FSA are crap, the UK regulator gives barclay's a 59m fine while the US regulator gives them a 240 million fine, why does the UK regulator give them such a low fine, they always give big companies small fines, if your going to teach them not to play around give them a fine that hurts, they must have made more that 59.9 m profits.

The uk ans us authorities have been working together on this, hence the simultaneous announcement of the fine. It is clear to me that they agreed how to share the spoils and there may have been reasons for the split. The thing is what is the overall fine' not each countries'.

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HOLA4425

Do the banks have to submit the truth or ate they signed up to some form of disclaimer that suggests their Libor submission is an estimate and is not the banks view etc etc

Zerohedge has been referring to Liebor for an age. It's becoming clear now but must be assumed as normal behavior in the biz?

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