This is the largest fine ever imposed by the FSA.
Barclays’ breaches of the FSA’s requirements encompassed a number of issues, involved a significant number of employees and occurred over a number of years. Barclays’ misconduct included:
- making submissions which formed part of the LIBOR and EURIBOR setting process that took into account requests from Barclays’ interest rate derivatives traders. These traders were motivated by profit and sought to benefit Barclays’ trading positions;
- seeking to influence the EURIBOR submissions of other banks contributing to the rate setting process; and
- reducing its LIBOR submissions during the financial crisis as a result of senior management’s concerns over negative media comment.
In addition, Barclays failed to have adequate systems and controls in place relating to its LIBOR and EURIBOR submissions processes until June 2010 and failed to review its systems and controls at a number of appropriate points.
Barclays also failed to deal with issues relating to its LIBOR submissions when these were escalated to Barclays’ Investment Banking compliance function in 2007 and 2008.
Tracey McDermott, acting director of enforcement and financial crime, says: “Barclays’ misconduct was serious, widespread and extended over a number of years. The integrity of benchmark reference rates such as LIBOR and EURIBOR is of fundamental importance to both UK and international financial markets. Firms making submissions must not use those submissions as tools to promote their own interests.
“Making submissions to try to benefit trading positions is wholly unacceptable. This was possible because Barclays failed to ensure it had proper controls in place. Barclays’ behaviour threatened the integrity of the rates with the risk of serious harm to other market participants.
“The FSA continues to pursue a number of other significant cross-border investigations in this area and the action we have taken against Barclays should leave firms in no doubt about the serious consequences of this type of failure.”
The BBA is currently undertaking a review of the way LIBOR is set and will publish its findings shortly. The FSA, along with the other tripartite authorities, is working to support market-led reviews of existing arrangements, with the goal of ensuring such arrangements continue to command the confidence of all stakeholders.
Barclays co-operated fully during the FSA’s investigation and agreed to settle at an early stage. The firm qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £85m.
This was a significant cross-border investigation and the FSA would like to thank the U.S. Commodity Futures Trading Commission, the U.S. Department of Justice (together with the Federal Bureau of Investigation) and the Securities and Exchange Commission for their co-operation.
The CFTC brought attempted manipulation and false reporting charges against Barclays for similar failings, which the bank agreed to settle. The CFTC imposed a penalty of US$200m.
In addition, as part of an agreement with the DOJ, Barclays admitted to its misconduct and agreed to pay a penalty of US$160m.