Rabobank, which began life as an agriculture cooperative in the Netherlands in the late 19th century, has become the largest Dutch lender and a modest player on the stage of world finance.
On Tuesday, it also joined the ranks of institutions tarnished by the global rate-setting scandal. Not only have a string of international banks been implicated in the affair but several criminal charges have been brought against traders.
Rabobank is the fifth financial firm to settle investigations related to its role in manipulating the benchmark known as the London interbank offered rate, or Libor, which helps set consumer and corporate borrowing rates around the world.
The settlement documents from British and United States regulators offer the latest in incriminating messages.
The Financial Conduct Authority of Britain says that Rabobank tried to manipulate yen Libor rates by colluding with brokers. Their evidence includes Rabobank’s share of embarrassing instant messages and emails between traders and submitters. It gives this November 2010 exchange:
Broker 1: ok we need lower libors tomorrow yes?
Trader 1: Yeah . . .
Broker 1: ok ill work some magic for tomorrow
Such discussions were frequent. From the middle of 2005 through 2008, a senior derivatives trader known as the Ambassador made requests for preferential Libor submissions, the Commodity Futures Trading Commission says in its order. If the Ambassador’s requests were not honored, he “complained and angrily expressed his displeasure,” says the order, which gives the following 2006 exchange (all caps in the original):
U.S. Dollar Trader: HI MATE, LOW 1S HIGH 3S LIBOR PLS!!! DONT TELL THE MBASS HAA HAAAAAAA. SOLD THE MARKET TODAY DOOOOHHHH!
Senior Manger 1: OK MATE, WILL DO MY BEST….SPEAK LATER
U.S. Dollar Trader: CHEERS GEEZ, BANG ON THE MONEY!
Senior Manager 1: NO WORRIES, I HAD TO WORK MY WAY OUT OF AN AMBASS HEADLOCK TO GET THOSE IN!
Some of the exchanges cited by regulators indicate how commonplace and easy it was for traders to submit rate requests, like this October 2008 yen Libor exchange:
Yen Desk Manager 1: Morning, mate, aright? …. LIBORS today, LIBORS, LIBORS, same?
Senior Manager 1: Where want ‘em?
Yen Desk Manager 1: …. smidgen lower?”
There were more than 500 improper requests to alter Libor and Euribor submissions by Rabobank employees, according to published findings by the US and UK authorities.
Rabobank has agreed to pay fines of 774m euros ($1bn; £662m) imposed by US, UK and Dutch regulators. The bank also added that its chief executive, Piet Moerland, had stepped down.
Regulators have been investigating the manipulation of Libor inter-bank lending rates since 2012 in the wake of Barclays’ £290m ($454m) fine by US and UK authorities.
The UK’s Financial Conduct Authority (FCA) said it had fined Rabobank £105m for “serious, prolonged and widespread misconduct relating to Libor”.
The £105m fine is the third-highest on record by the FCA or its predecessor, the Financial Services Authority (FSA).
The FCA said the bank’s “poor internal controls” encouraged collusion between its traders and Libor submitters and attempts at benchmark manipulation.
Rabobank did not fully address these failings until August 2012, despite assuring the regulator in March 2011 that “suitable arrangements” were in place, the FCA said.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “Traders and submitters treated Libor submissions as a potential way to make money, with no regard for the integrity of the market. This is unacceptable.”
Ms McDermott added: “Rabobank’s flawed assurances and failure to get a grip on what was going on in its business were extremely disappointing.” The emails and instant messages provide “an insight into the culture and attitudes of the institution in question”.
In February 2013, Royal Bank of Scotland (RBS) was fined £390m by UK and US regulators for its part in the Libor scandal. At the time, the FSA fined RBS £87.5m, while about £300m was paid to US regulators and the US Department of Justice.
Last month, UK broker ICAP was fined $87m for its part in the rate-fixing scandal. In addition, three of its former traders were charged in New York with several counts of wire fraud.
