Risk register · entry
Q-F · FraudLIBOR rigging scandal
The world's most important number, submitted by email each morning. The banks made it up.
The fifth quadrant, where the thing was never real. The tell is that the story is too clean.
Why this room
LIBOR belongs in the Fraud quadrant because the input was fabricated rather than merely mismeasured. The benchmark was never derived from observed transactions; it was a daily self-report by panel banks of an estimated borrowing cost, and regulator settlements establish that traders and submitters at those banks selected figures to profit their own derivatives books and, during the 2007-2009 crisis, to disguise the bank's funding stress. The qf tell is the cleanness of the story: a number presented to the market as the objective cost of interbank credit, referenced by hundreds of trillions of notional exposure, whose accuracy no transaction ever verified and whose integrity rested entirely on the honesty of the submitting institutions.
The record
- On 27 June 2012 the CFTC fined Barclays USD 200 million for attempted manipulation and false reporting of LIBOR and Euribor, alongside a USD 160 million DOJ penalty and a GBP 59.5 million FSA fine, the first LIBOR enforcement action against any bank.certain
- The CFTC's 19 December 2012 order against UBS imposed a USD 700 million penalty and documented approximately 2,000 written requests to manipulate submissions over roughly three years, covering about 75% of UBS's Yen LIBOR submission days in that period.certain
- UBS's senior Yen trader induced at least five interdealer brokers to help move the rate, paying them roughly USD 216,000 in fees and bonuses over two years, and cultivated traders at at least four other panel banks to move their own banks' submissions.certain
- By April 2015 the CFTC alone had imposed nearly USD 2.7 billion in penalties on six financial institutions and two interdealer brokers for LIBOR, Euribor and other interest rate benchmark abuses.certain
- Cumulative fines levied by regulators in the United States, the United Kingdom and the European Union exceeded USD 9 billion, against a benchmark referenced by roughly USD 350 trillion notional of swaps and USD 10 trillion of loans.high
Sources
The book
This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.
Join the waiting list