Rabobank agreed to pay $1bn to US, UK and Dutch authorities and admitted that dozens of employees manipulated Libor and other key benchmark interest rates over six years in a significant settlement that claimed the Dutch lender’s chief executive.
On Tuesday, Rabobank said that 30 employees were involved in “inappropriate conduct”, and that Piet Moerland, its chief executive, would resign with “immediate effect”. Rinus Minderhoud, member of the bank’s supervisory board, would replace him on an interim basis, it said.
The settlement marks the second largest fine against a bank for manipulating Libor behind the $1.5bn UBS paid to authorities last year. Rabobank is the fourth lender to settle Libor investigations, which has ensnared nearly a dozen banks and interdealer brokers.
Rabobank admitted wrongdoing as part of a deferred-prosecution agreement with the US Department of Justice’s criminal division and agreed to co-operate in the ongoing criminal investigation into the bank’s employees.
“For years, employees at Rabobank, often working with traders at other banks around the globe, illegally manipulated four different interest rates – Euribor and Libor for US dollar, yen, and pound sterling – in the hopes of fraudulently moving the market to generate profits for their traders at the expense of the bank’s counterparties,” said Mythili Raman, the acting chief of the DoJ’s criminal division.
“We are very focused on misconduct by individuals at Rabobank and that is a continuing focus of our investigation,” Ms Raman said. Individuals who worked at other banks embroiled in the Libor probe also remain under investigation, she said.
The Rabobank employees, including a senior manager, worked in offices in Tokyo, London, New York and Utrecht.
Paul Robson, a former money-market manager who left the bank in 2008, is one of those individuals under investigation, people familiar with the matter said. His lawyer has previously declined to comment noting that the DoJ has not made any charging decisions.
The misconduct was so “entrenched”, the Commodity Futures Trading Commission said, that new employees were trained in executing the unlawful practices. While most of the time Rabobank submitters manipulated rates to help their own positions, at times they helped other banks, including UBS, attempt to manipulate rates.
Some of the employees wore two hats, both submitting rates to the panel while also trading their own positions – in what regulators called an “embedded” conflict of interest that resulted in them placing rates at levels to benefit their trades and those of colleagues.
In August 2007, Rabobank’s senior yen trader asked the submitter where he was setting different rates.
“You tell me what you want mate,” the yen trader-submitter replied, according to court filings.
The senior yen trader sent him a list of rates for each of his positions.
“If you want me to give me them each day I’ll input whatever you want mate,” the trader-submitter said.
On another occasion in 2006 one money-markets manager said, “I am fast turning into your Libor bitch!!!” in response to a request from a dollar-derivatives trader at the Dutch bank to raise the rates for three-month dollar Libor submissions.
The misconduct crosses all borders. In the US dollar market, traders cowed at a senior trader nicknamed “Ambassador” and made his requests above all others.
At times, Rabobank submitters moved the rates knowing they were incorrect. In September 2007 after fielding a request from a trader to move the yen Libor rate higher, the Rabobank submitter said he would probably get a few phone calls complaining. “Don’t worry mate – there’s bigger crooks in the market than us guys!” he told the trader. That day the submitter moved the rate higher by 0.90, an increase of seven basis points from its previous submissions.
On another occasion a yen trader suggested to another submitter to “keep Libors [among] one of the lowest four banks is the good idea because it isn’t obvious so that [people] wouldn’t notice. If it is too obvious, [people] could start looking at us manipulating Libors.”
On some occasions, traders at other banks set rates to help Rabobank traders. In May 2006, a yen submitter at Rabobank asked a trader at another bank for a “silly low” fix on behalf of a colleague in Singapore. The trader at the other bank replied, “Tell him I’ll do [the] same if he gets me a job!!!!”
Authorities credited Rabobank with its significant co-operation. Rabobank spent almost four years trawling through millions of emails, chats and in-boxes. It wasn’t until November 2012 that management found the first incriminating communications between traders and submitters.
Rabobank stressed that no top managers were aware of the manipulation efforts. However, the lender said Mr Moerland, as well as his three colleagues on the executive board, voluntarily forfeited €2m in bonuses for 2010 and 2011. The bank sacked five former traders and submitters and a sixth one is still at risk of being dismissed. About a dozen others had been disciplined by taking management responsibility from them, through formal warnings and by reclaiming a total of €4.2m in bonuses.
“The conduct of these individuals, and the language of some of these individuals’ communications, has shocked me,” said Mr Moerland.