Eight
workers dismissed for manipulating benchmark interest rate, with cuts to
overall bonus pool also expected
The Guardian, Jill Treanor, Monday 29 September 2014
Lloyds Banking Group has fired eight staff and withheld £3m of bonuses following “unacceptable” actions that led to the bailed out bank being fined for Libor rigging.
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| Lloyds Banking Group fires staff for Libor rigging. Photograph: Amer Ghazzal/ Amer Ghazzal/Demotix/Corbis |
Lloyds Banking Group has fired eight staff and withheld £3m of bonuses following “unacceptable” actions that led to the bailed out bank being fined for Libor rigging.
The bank
also indicated its entire bonus pool could be cut to reflect the £226m of
penalties it was forced to pay for manipulating the benchmark interest rate.
Lord
Blackwell, the new chairman of the 24% taxpayer owned bank, said: “The board
has been clear that it views the actions of those responsible for the
misconduct … as being completely unacceptable.”
Lloyds was the seventh bank to be fined for rigging Libor but the first to be punished for
depriving the Bank of England of fees it should have received for providing
emergency financing during the financial crisis.
Part of the
penalty was £7.8m redress to Threadneedle Street for manipulating a separate
interest rate – the repo rate – used to calculate the scale of the fees it paid
for the Bank’s liquidity scheme to keep down the cost of obtaining money during
the credit crisis.
While eight
Lloyds staff have been dismissed and lost their bonuses, four more were cleared
and allowed back to work.
It is
unclear what has happened to the bonuses of 10 bankers who had already left, as
Lloyds has no power to claw back the cash. The details of those 10 have been
passed to the City regulator, the Financial Conduct Authority.
Among those
fired were three of the four unnamed individuals who may have been involved in
depriving the central bank of emergency funding fees.
Blackwell
appeared to indicate that further cuts could be made to bonuses, saying: “The
remuneration committee is tasked with ensuring that the outcome of the
disciplinary process and the significant reputational damage and financial cost
to the group are fully and fairly reflected in the options considered in
relation to other staff bonus payments.”
António
Horta-Osório, the Lloyds boss who joined after the offences took place –
between 2006 and 2009 – said he was determined the bank should have high levels
of integrity.
“Having now
taken disciplinary action against those individuals responsible for the totally
unacceptable behaviour identified by the regulators’ investigations, the board
and the group’s management team are committed to preventing this type of
behaviour happening again,” he said.
When the
bank was fined, regulators published a string of embarrassing emails and
electronic chats, including one remark from a Lloyds employee who quipped when
asked about reducing a Libor rate: “Every little helps … It’s like Tescos.” The
trader replied: “Absolutely every little helps.”
The fine
was imposed by the FCA as well the US department of justice and the US
regulator, the Commodities Futures Trading Commission. Mark Carney, governor of
the Bank of England, issued a furious response because of the steps taken by
traders to reduce the fees that Lloyds, which also owns Bank of Scotland and Halifax,
paid for emergency funding.
“Such
manipulation is highly reprehensible, clearly unlawful and may amount to
criminal conduct on the part of the individuals involved,” Carney said at the
time. He also asked the Prudential Regulation Authority, the Bank’s regulation arm, to
investigate.
The Serious
Fraud Office is investigating a number of firms, including Lloyds, for rigging
interest rates and has brought charges against 12 individuals.
Professor
Mark Taylor, dean of Warwick Business School, said: “Many will see this as
closing the stable door too late, but the fact is that the City has begun to
clean up its act and wants to be seen to be doing so.
“We have
already seen the setting of Libor passing from a cosy conversation between a
few City traders to being professionally managed by NYSE Euronext based on
actual market trades, and that has done a great deal to restore confidence and
belief in the integrity of the world’s most important financial centre.”
This is the
second issue for which Lloyds has taken high-profile action to claw back or
withdraw bonuses from staff. In February 2012, it became the first bank to publicly hold back pay from senior staff – including its former boss Eric
Daniels – for losses incurred from payment protection insurance misselling.
Lloyds has
been fined £4.3m for delaying payouts for customers claiming they were missold
PPI and last year was hit with a £28m fine for linking bonuses to sales to such
an extent that staff were offered “a grand in your hand” and one employee even
sold products to himself, his wife and a colleague to avoid demotion.
The Libor
rigging incident, first exposed in 2012 when Barclays was fined £290m, hammered
the reputation of the industry and further fines for manipulating the benchmark
rate are expected before the end of the year.
Six banks
are also facing fines for rigging the £3.5tn a day currency markets and facing
pressure from the FCA to settle in eight weeks.
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