Britain’s FCA Bans Ex-Rabobank Trader Over Libor Rigging

Britain’s Financial Conduct Authority is banning former Rabobank trader Lee Stewart from the securities industry. Stewart pled guilty to conspiracy to commit wire fraud and bank fraud related to Libor rigging in the United States earlier this year.

The British regulator said that the bar is for a lack of “honesty and integrity.” The FCA said that Stewart took part in the “criminal conspiracy” to manipulate the benchmark rate over an extended period and engaged in “deliberate misconduct.”

The former Rabobank senior derivatives trader admitted to misconduct involving the Dutch lender’s submission of the London interbank offered rate as it was tied to the dollar. Stewart acknowledged that the rigging scam went on for almost five years, from May 2006 to early 2011.

He is one of three ex-employees at the bank to admit wrongdoing involving Libor manipulation. Seven Rabobank employees were charged in the U.S. for the alleged crimes.

Rabobank admitted that its employees engaged in criminal wrongdoing related to benchmark rigging in 2013. The bank consented to pay over $1 billion to resolve criminal and civil cases by regulators in the U.S., Britain, and elsewhere.

Libor
Libor is key in determining borrowing costs for over $300 million in loans internationally, including complex derivatives and student loans. Banks have to submit the rates at which that they are willing to lend money to each other at different maturities and differing currencies.

To calculate the benchmark, every morning a representative panel of internal banks turns in an estimate of borrowing costs to the Thompson Reuters data collection service. Thompson Reuters then discards the 25% lowest and highest of the submissions, respectively, before averaging the rates that are left to arrive at the Libor rate.

To date, interdealer brokers and banks have paid some $9 billion in fines for Libor manipulation. Numerous banks are accused of plotting together to rig interest rates so they could profit. Libor rigging began in 2013. Some of the banks linked to the manipulation scandal are Royal Bank of Scotland (RBS), UBS (UBS), Deutsche Bank (DB), and Barclays (BARC).

In Britain, Ex-Rabobank Trader Barred From Industry in Libor Scandal, New York Times, July 30, 2015

Former U.K. Rabobank Derivatives Trader Pleads Guilty to LIBOR Interest Rate Manipulation Charges, Justice.gov, March 23, 2015

Ex-Deutsche Bank Employees May Face Libor Rigging Charges, Institutional Investor Securities Blog, July 11, 2015