Lloyds fined millions for trying to rig Bank of England bail-out
Lloyds Banking Group has been fined a total of £218m after it admitted "shocking" rate rigging practices, including ripping off the Bank of England over its financial life support scheme.
The penalties from UK and US regulators covered the manipulation of the benchmark repo rate – used to calculate fees due to the Bank for its support in the financial crisis – as well as the interbank lending rate Libor.
Lloyds has now paid £7.8m in compensation to the central bank after it admitted manipulating the repo rate to try to reduce fees.
It said those involved in the rigging practices had either left, been suspended, or were subject to disciplinary proceedings, and that it would consider "remuneration implications".
This is likely to mean clawing back bonuses of those directly involved, which could even extend to others should this be merited.
Lloyds becomes the seventh firm to be fined by the Financial Conduct Authority (FCA) for Libor-related misconduct but the regulator said the ripping off of the Bank of England was the first case of its kind.
Britain's FCA fined Lloyds £105m, including £70m for its attempts to rig the Special Liquidity Scheme (SLS) – the taxpayer-backed scheme to support UK banks during the financial crisis.
The rest of the fine related to the manipulation of Libor, the benchmark interest rate used in hundreds of trillions of dollars worth of loans and transactions.
Part of the Libor misconduct came after pressure from a manager over market perception of its financial stability during the financial crisis, the FCA found, as well as attempts to boost trading positions.
A trader quoted by the FCA said: "I've been pressured by senior management to bring my rates down into line with everyone else."
Libor rigging also resulted in a £62m pay-out to America's Commodity Futures Trading Commission and £52m to the US Department of Justice.
The FCA fine relates to the behaviour of Lloyds TSB and Halifax Bank of Scotland, part of the same wider group and at the centre of the financial crisis. Lloyds Banking Group remains 25% owned by the taxpayer after its rescue.
The repo rate probe covered a period between April 2008 and September 2009, involving four individuals – a manager and a trader at each firm.
Libor rigging took place between May 2006 and June 2009, with 16 individuals directly involved, seven of them managers – including one who was also involved in the repo misconduct.
The FCA said: "At both firms there was a culture on the money market desks of seeking to take a financial advantage wherever possible." In one exchange it published, a trader was quoted telling a manager: "every little helps... it's like Tescos".
The FCA did not find there was "deliberate misconduct" by the banks but found that because of poor culture, and weak systems and controls, they "failed to prevent the deliberate, reckless and frequently blatant actions of a number of their employees".
Lloyds said: "The issues subject to the settlements were restricted to a specific area of the business and were not known about or condoned by the senior management of the group at that time.
"The individuals involved have either left the group, been suspended or are subject to disciplinary proceedings. The group's board will now consider all the remuneration implications and potential actions available to it."