28th Jul 2014 14:12
LONDON (Alliance News) - Lloyds Banking Group PLC Monday said that it has been fined GBP218.0 million by US and UK authorities for the manipulation of its submissions to the British Bankers' Association London Interbank Offered Rate and Sterling Repo Rate, making it the latest in a long list of financial institutions to have agreed settlements over past misconduct in relation to benchmarks.
Lloyds was fined GBP105.0 million by the UK's Financial Conduct Authority as it received a 30% discount for its cooperation, and USD105.0 million by the US Commodity Futures Trading Commission. In addition, the lender entered into a deferred prosecution agreement with the US Department of Justice, deferring criminal wire fraud charges in exchange for Lloyds continuing to cooperate and agreeing to an USD86.0million penalty.
The Financial Conduct Authority said that it fined Lloyds Banking Group subsidiaries Lloyds Bank PLC and Bank of Scotland PLC for serious misconduct relating to the Special Liquidity Scheme, the Repo Rate, and Libor. The GBP105.0 million fine is the joint-third-highest imposed by the FCA to date.
The FCA fine includes GBP70.0 million related to attempts to manipulate the fees payable to the Bank of England for the firms? participation in the SLS, a taxpayer-backed government scheme designed to support UK banks during the financial crisis. Lloyds Banking Group has also paid the Bank of England GBP7.76 million in compensation for the reduction in the amount of SLS fees.
"The fact that Lloyds and Bank of Scotland, the largest beneficiaries of this assistance, manipulated their three month GBP Repo Rate submissions in order to reduce fees is highly reprehensible and clearly unlawful," the Bank of England said in a statement in which it also said that fees payable by other banks under the SLS were also reduced as a result. The central bank said that the compensation payment takes this fully into account.
Between April 2008 and September 2009, the Lloyds units manipulated their Repo Rate submissions, referring to a now discontinued benchmark rate, in order to reduce the fees payable.
Tracey McDermott, the FCA?s director of enforcement and financial crime, said that said that the collusion came at the expense of the taxpayer, describing the misconduct as unaccetable.
"The abuse of the SLS is a novel feature of this case but the underlying conduct and the underlying failings - to identify, mitigate and monitor for obvious risks - are not new. If trust in financial services is to be restored then market participants need to ensure they are learning the lessons from, and avoiding the mistakes of, their peers. Our enforcement actions are an important source of information to help them do this," McDermott said in a statement.
In the US, the CFTC said that in a few instances Lloyds TSB, as it was known at the time, was successful in its manipulation of Sterling LIBOR and Yen LIBOR.
"By today?s action, Lloyds is being held accountable for serious misconduct,? said Aitan Goelman, CFTC Director of Enforcement. "The CFTC remains committed to taking all actions necessary to ensure the integrity of the markets we oversee."
Lloyds' settlements for its role in the Libor scandal follow those imposed on fellow UK banks Royal Bank of Scotland Group PLC and Barclays PLC. RBS was fined GBP390.0 million by UK and US regulators in February last year, while Barclays was fined GBP290.0 million in June 2012.
Lloyds Chairman Lord Blackwell said that the actions of the individuals behind the misconduct were completely unacceptable, and added that he has written to Bank of England Governor Mark Carney "to make clear we have a common view on this."
Chief Executive António Horta-Osório said that the group takes the findings of the investigations very seriously.
"Together, the board and the group's management team have taken vigorous action over the last three years to prevent this kind of behaviour, through closing or reducing our legacy investment banking activities. In addition we have implemented a customer-focused, UK-centric strategy, changed our culture and values, improved systems and processes, and implemented more effective controls," Horta-Osório said in a statement.
Lloyds said that the manipulation of submissions covered by the settlements took place between May 2006 and 2009 and the individuals involved have either left the group, been suspended or are subject to disciplinary proceedings. The settlements pre-date Lloyds' current management team.
In a note titled 'USD370 million LIBOR settlement ? just a drop in the ocean?' Investec analyst Ian Gordon, who has a 'buy' and an 85 pence target price on Lloyds' shares, said that he is "not unduly perturbed by the quantum of [the settlement]."
Lloyds shares were Monday quoted up 0.2% at 74.94 pence.
By Samuel Agini; [email protected]; @samuelagini
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