How to get rich - defraud borrowers

http://www.bloomberg.com/news/2012-12-23/ubs-libor-manipulation-deserves-the-death-penalty.html

Libor is a benchmark index rate, off which trillions of dollars of loans are priced on a daily basis. According to the Wall Street Journal, two of the many victims of the Libor fraud -- a scandal that so far has nabbed Barclays Plc and UBS but will probably include other large global banks -- were the quasi-federal housing agencies Fannie Mae and Freddie Mac, which together claim to have lost more than $3 billion as a result of the manipulation.

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It found that unidentified UBS traders entered into “wash trades” -- described as “risk-free trades that canceled each other out” and had no commercial rationale -- in order to “facilitate corrupt brokerage payments” to three individual brokers at two other firms.


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http://www.guardian.co.uk/commentisfree/2012/dec/20/ubs-libor-rates-scandal-banks

The Guardian, Thursday 20 December 2012

Call it scandal fatigue. A palpable sense of resignation now greets each fresh revelation of even the most colossal financial fiascos. Whether it is HSBC handing over £1.2bn in fines and charges for lax controls against money-laundering, Kweki Adoboli getting seven years' jail for rogue trading, or JP Morgan fessing up to over £3.5bn in losses from making supersize bets in the City, these debacles register – but fail to generate the anger that the sums and the misconduct involved deserve.

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And crucially, it shows not just a few rotten apples but an entire rotten culture, where highly paid staff at some of the world's biggest banks and City dealers colluded in fixing quoted market prices.

They did so blatantly – through emails and internet message boards – and cynically. "You know, scratch my back, yeah an all," reads one exchange from a banker to a broker at another firm. "Oh definitely, yeah, play the rules." They did it for personal gain: "I'll pay you, you know, 50,000 dollars, 100,000 dollars... whatever you want," reads another UBS trader's promise.

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This corruption of one of the most prosaic things in financial markets was so widespread that senior managers either allowed it, or turned a blind eye, or were so negligent as to raise questions about whether they violated their fiduciary duties to shareholders. For the record, UBS went for years without proper supervisory controls on the department that fixed Libor. Yet this goes beyond a single Swiss bank, even one as large and ungainly as UBS. Over at taxpayer-owned RBS, Stephen Hester has been warning for months that he will soon need to surrender a massive fine to regulators. And the watchdogs themselves are investigating not only banks, but broker-dealers. An entire industry is now under a huge and very black shadow.

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http://www.telegraph.co.uk/finance/libor-scandal/9751750/Libor-scandal-More-than-30-UBS-bankers-to-be-implicated-in-rate-rigging.html

By Garry White
8:56PM GMT 17 Dec 2012

Authorities are this week expected to say that more than 30 bankers and managers at Swiss banking giant UBS were involved in the alleged rigging of the key Libor interest rate.

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The news comes as RBS is reported to have reached a sticking point in negotiations with the City regulator over the scale of its involvement in fixing Libor, a key City interest rate used as the reference rate for loans and financial derivatives worth more than $300 trillion.

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Last week, three former City traders were arrested over the alleged manipulation of Japanese borrowing rates as part of a Serious Fraud Office investigation into Libor-rigging. The men were the first to be arrested in connection with the criminal investigation and were taken into custody by City of London Police last Tuesday.

Former Citigroup and UBS trader Thomas Hayes, as well as Terry Farr and Jim Gilmour, employees of inter-dealer broker RP Martin, are believed to be the men arrested at their homes in Surrey and Essex.

All three are understood to have been involved in trading connected to Yen Libor, the benchmark Japanese borrowing rate.

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http://www.huffingtonpost.com/2012/12/19/ubs-criminal-penalties-libor_n_2329424.html

According to the regulators, at least 45 different managers and traders were involved in a scheme to manipulate key benchmark lending rates known as Libor and Euribor, which affect "hundreds of trillions of dollars of financial contracts around the world," notes David Enrich of the Wall Street Journal.


http://business.time.com/2012/12/20/libor-scandal-yep-its-as-bad-as-we-thought/

For the global financial industry, this ruling is just the beginning. Several other large banks should still expect enforcement actions brought against them, and any bank involved in the scandal should expect to be fighting lawsuits involving LIBOR for years to come. On October 15, The Financial Times reported on a lawsuit brought against 12 of the world’s largest banks by five Alabama homeowners, which alleges that rate manipulation increased the interest they had to pay on their mortgages by thousands of dollars. Given how widely used LIBOR is to price financial instruments, homeowners are just one group that could have potentially lost money due to rate manipulation.

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http://www.forbes.com/sites/halahtouryalai/2012/12/19/libor-scandal-just-took-a-nasty-turn-collusion-findings-should-make-banks-very-nervous/

12/19/2012

The UBS settlement is one that other banks under investigation are going to be looking at very closely. If the Barclays settlement rattled Libor-submitting firms then the UBS case has got them shaking in their shiny loafers.

Why? Simply put: Collusion. The charges made against UBS show the bank not only manipulated the Libor rate to make itself look healthier to outsiders but also, and perhaps more often, to make money by apparently colluding with other banks. From a regulator’s perspective that’s a lot worse than lying a bit to appear in better condition.

Here’s some background. Libor, if you need a refresher, stands for the London Interbank Offered Rate. It’s the rate at which banks are able to borrow money from each other. The lower a bank’s rate (banks submit their own rates) the healthier it’s deemed to be and vice versa. The rates were especially indicative of banks’ health during the peak of the financial crisis when the markets were all but frozen and access to funds were limited.

An agency takes those submissions from the banks, lobs off the top 25% and bottom 25% and publishes the average of the remaining rates. That’s how the Libor rate–a rate tied to hundreds of trillions of dollars worth of financial contracts and derivatives. Manipulated rates seriously hurt the integrity of the system.

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The CFTC says UBS colluded with at least four other panel banks to make false submissions, and induced at least five interdealer brokers to disseminate false information or otherwise influence other panel banks’ submissions.

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The documents released by authorities do not reveal the names of the other banks mentioned by UBS traders but the CFTC says at least four other banks colluded with the Swiss bank.

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http://www.economist.com/news/finance-and-economics/21569053-banks-face-another-punishing-year-fines-and-lawsuits-year-lawyer

The main legal risk facing big international banks relates to a widening scandal over attempts to rig benchmark interest rates, including the London Interbank Offered Rate, or LIBOR. The most recent LIBOR-related fine was levied on December 19th, when British, Swiss and American authorities imposed penalties of SFr1.4 billion ($1.5 billion) on UBS, a Swiss bank. In its legal settlement with regulators UBS admitted to “widespread and routine” attempts to manipulate LIBOR rates. Its fine came six months after an earlier settlement and admission by Barclays that its traders, too, had tried to rig LIBOR.

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The Royal Bank of Scotland, which hopes to reach an agreement with regulators within the next two months, is thought likely to pay a fine of at least $500m. It will not be the last. More than 20 banks in total are understood to be under investigation or co-operating with various regulatory authorities.

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