Rabobank of the Netherlands has agreed to pay about $1 billion to settle U.S., British and Dutch charges of manipulating a key global interest rate. The bank’s chairman resigned as it became the fifth financial firm sanctioned in the international rate-rigging scandal. The amount Rabobank is paying includes $325 million in an agreement with the U.S. Justice Department that allows the bank to avoid criminal prosecution in exchange for its continued cooperation in the investigation of major banks’ conduct regarding LIBOR.
Rabobank, one of the world’s largest banks, engaged in rigging of the London interbank offered rate, or LIBOR, from 2005 to 2011. The LIBOR rate affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans. A British banking trade group sets the rate daily after more than a dozen big banks submit estimates of their borrowing costs. Britain’s Barclays and Royal Bank of Scotland, Switzerland’s biggest bank UBS and British brokerage ICAP have paid a total of about $2.6 billion to settle charges of rigging the LIBOR.
The U.S. Commodity Futures Trading Commission (CFTC) levied a $475 million civil penalty against Rabobank, saying its traders engaged in “hundreds of manipulative acts” that hurt the integrity of the LIBOR rate. The traders caused inaccurate submissions of its borrowing costs to be made that benefited banks’ trading positions, the agency said. It said some Rabobank employees themselves called the submissions at the time ludicrously high or low. During the six years, more than two dozen Rabobank employees in six offices in Europe, the U.S. and Asia were involved in the violations, the CFTC said. Rabobank settled the CFTC’s charges of manipulation and false reporting, and aiding the attempts of traders at other banks to manipulate the LIBOR. In addition to paying the penalty, the bank agreed to take steps to ensure that it submits accurate estimates of its borrowing costs used to calculate the rate.
In addition, Britain’s Financial Conduct Authority fined Rabobank about $170 million, citing “serious, prolonged and widespread misconduct.” Rabobank’s London office was one of those where traders and desk managers were said to have engaged in manipulation. The Dutch Public Prosecutor’s Office signed a deferred prosecution agreement with Rabobank in which the bank is paying $96.5 million. According to the U.S. Justice Department, Rabobank admitted manipulating its submissions that affected the LIBOR rate and agreed to cooperate in the broad LIBOR investigation. It appears that this joint investigation is far from over.
Under a change announced in July, the London-based company that owns the New York Stock Exchange, NYSE Euronext, will take over supervising the setting of LIBOR from the British Bankers’ Association. The changeover is scheduled to be completed by early next year.
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