Just when you thought that LIBOR had gone away and regulators were focusing on banks’ alleged efforts at manipulating the silver fix instead, LIBOR is back. Lloyds is paying £218m in fines, including £7.76m to the Bank of England for deliberately skewing LIBOR rates.
Lloyds’ malfeasance is particularly objectionable because its traders were also manipulating the repo rate which determined the amount Lloyds owed the British government under the Special Liquidity Scheme put in place to help underpin precarious banks.
In other words, Lloyds’ traders gamed the very system designed to save them.
Cynics may say this is typical trader behaviour. Lloyds is not inclined to treat the matter so lightly. Lloyds’ chairman says its traders’ behaviour was, ‘highly reprehensible’ and may amount to criminal conduct.
Heads are rolling/have rolled. The Financial Times reports that Lloyds has already let go of 10 people as a result of rates manipulation and that a further 16 are under investigation.
Most notably, however, the FT says Lloyds is considering “remuneration implications and potential actions available to it”. Specifically, Lloyds is likely to attempt to clawback bonuses from former employees.
This should strike fear into the heart of all traders everywhere. Lloyds’ LIBOR infractions happened in 2009 – five years ago. Many of those involved have left the bank. It’s likely they have have spent the money. They quite probably haven’t worked since. And now Lloyds is coming for them and asking them to repay bonuses they received half a decade earlier. In light of their stupidity, this is right and proper. But it also means that traders should never think of bonuses in quite the same sense again.