Barclays Bank has been fined a record ￡59.5m by the Financial Services Authority (FSA) over serious and widespread misconduct relating to the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR)
The bank has also agreed to pay fines of $160m (£102.29m) to the US Department of Justice and $200m (£127.86m) to the Commodities Futures Trading Commission.
The FSA found that over several years a significant number of Barclays’ employees engineered the bank’s LIBOR and EURIBOR rates so that they favoured some of the bank’s interest rate derivatives. "These traders," the FSA says, "were motivated by profit and sought to benefit Barclays’ trading positions."
Bank staff also tried to influence the EURIBOR submissions of other banks contributing to the rate-setting process and reduced Barclays’ LIBOR submissions during the financial crisis as a result of senior management’s concerns over negative media comment.
It has also been confirmed this afternoon that in light of the fines, Bob Diamond, Barclays chief executive, will hand back his bonus for 2012. In a statement, Diamond said, "The events which gave rise to today’s resolutions relate to past actions which fell well short of the standards to which Barclays aspires in the conduct of its business.
"When we identified those issues, we took prompt action to fix them and co-operated extensively and proactively with the authorities.
"Nothing is more important to me than having a strong culture at Barclays; I am sorry that some people acted in a manner not consistent with our culture and values. To reflect our collective responsibility as leaders, Chris Lucas, Jerry del Missier, Rich Ricci and I have voluntarily agreed with the Board to forgo any consideration for an annual bonus this year."
Diamond's remuneration package was £17m this year, plus a deal that the bank would pay a £5.7m tax bill on his behalf.
According to the FSA, Barclays failed to have adequate systems and controls in place relating to its LIBOR and EURIBOR submissions processes until June 2010 and omitted 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.
"The integrity of benchmark reference rates such as LIBOR and EURIBOR is of fundamental importance to both UK and international financial markets", said the FSA’s acting director of enforcement and financial crime Tracey McDermott. "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 said that Barclays co-operated fully with the investigation and agreed to settle at an early stage. As a result it was eligible for a 30% discount which reduced the fine from £85m.
The US Justice Department also gave Barclays credit for its “extraordinary cooperation and remediation efforts” and said that, as a result, it had agreed not to prosecute the bank for providing false LIBOR and EURIBOR contributions, provided it satisfies its ongoing obligations under the agreement for a period of two years.
It made it clear however that the non-prosecution agreement only applied to the bank and not to any employees or officers of Barclays or any other individuals.