The FCA has fined Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) for "serious, prolonged and widespread misconduct" relating to the London Interbank Offered Rate (LIBOR).
The £105 million fine is the third highest ever imposed by the FCA or its predecessor, the Financial Services Authority, and the fifth penalty for LIBOR-related failures.
Rabobank's poor internal controls encouraged collusion between traders and LIBOR submitters and allowed systematic attempts at benchmark manipulation. Rabobank did not fully address these failings until August 2012, despite assuring the FCA in March 2011 that suitable arrangements were in place.
Tracey McDermott, the FCA's director of enforcement and financial crime said: "Rabobank's misconduct is among the most serious we have identified on LIBOR. Traders and submitters treated LIBOR submissions as a potential way to make money, with no regard for the integrity of the market. This is unacceptable.
"Rabobank's flawed assurances and failure to get a grip on what was going on in its business were extremely disappointing. Firms should be in no doubt that the spotlight will remain on wholesale conduct and we will hold them to account if they fail to meet our standards."
LIBOR is based on daily estimates of the rates at which a panel of banks borrow funds from one another. Between May 2005 and January 2011, Rabobank allowed derivatives and money market traders to:
• Make, or influence others at the bank to make LIBOR submissions that benefitted trading positions linked to Sterling (GBP), Dollar (USD) and Yen (JPY) LIBOR;
• Collude with individuals at other LIBOR panel banks and interdealer firms to influence JPY and USD LIBOR submissions made by other panel banks; and
• Collude with individuals at other LIBOR banks and interdealer broker firms who sought to influence Rabobank's JPY LIBOR submissions
This meant that the affected LIBOR submissions from Rabobank, and some of the LIBOR submissions made by other panel banks, didn't fairly reflect the cost of inter-bank borrowing, undermining the overall integrity of LIBOR.
Rabobank failed to act with due skill care and diligence; identify, manage or control the relevant risks; or meet proper standards of market conduct. This breached three of the FCA's fundamental principles for businesses, which underpin its objectives to ensure that markets function effectively, and to promote market integrity.
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The FCA found over 500 instances of attempted LIBOR manipulation, directly or indirectly involving at least 9 managers and 19 other individuals based across the world. At least one manager was actively involved in attempted manipulation and facilitated a culture where this practice appeared to be accepted, or even endorsed by the bank. In April 2009, a JPY LIBOR submitter informed Rabobank's internal audit group that his submissions were based on direct instructions from traders, yet the bank failed to address the issue.
Rabobank cooperated with the FCA's investigation and agreed to settle early, qualifying for a 30% discount on its fine. Without the discount, the fine would have been £150 million.
The FCA has thanked De Nederlandsche Bank (DNB), the Openbaar Ministerie (OM), the Japanese Financial Services Authority (JFSA), the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice (DoJ) for their co-operation in this investigation.
On 27 June 2012, the FCA fined Barclays Bank plc £59.5 million for misconduct relating to LIBOR and EURIBOR. On 19 December 2012, the Financial Services Authority (FSA), the FCA's predecessor, fined UBS AG £160 million for significant failings in relation to LIBOR and EURIBOR, and on 6 February 2013, the FSA fined The Royal Bank of Scotland plc £87.5 million for misconduct relating to LIBOR. On September 2013, the FCA fined ICAP Europe Limited £14 million.