Euribor, which is calculated in a similar fashion by the European Banking Federation (EBF), is another globally important rate that measures the cost of borrowing in the Economic and Monetary Union of the European Union.
LIBOR impacts enormous volumes of swaps and futures contracts, commercial and personal consumer loans, home mortgages and other transactions. For example, U.S. Dollar LIBOR is the basis for the settlement of the three-month Eurodollar futures contract traded on the Chicago Mercantile Exchange (CME), which had a traded volume in 2011 with a notional value exceeding $564 trillion. In addition, according to the BBA, swaps with a notional value of approximately $350 trillion and loans amounting to $10 trillion are indexed to LIBOR. Euribor is also used internationally in derivatives contracts. In 2011, over-the-counter interest rate derivatives referenced to Euro rates had a notional value in excess of $220 trillion, according to the Bank for International Settlements. LIBOR and Euribor are relied upon by countless large and small businesses and individuals who trust that the rates are derived from candid and reliable submissions made by each of the banks on the panels.
Barclays’ Unlawful Conduct to Benefit Derivatives Trading Positions
As the Order shows, Barclays, in pursuit of its own self-interest, disregarded the fundamental principle that LIBOR and Euribor are supposed to reflect the costs of borrowing funds in certain markets. Barclays’ traders located at least in New York, London and Tokyo asked Barclays’ submitters to submit particular rates to benefit their derivatives trading positions, such as swaps or futures positions, which were priced on LIBOR and Euribor. Barclays’ traders made these unlawful requests routinely, and sometimes daily, from at least mid-2005 through at least the fall of 2007, and sporadically thereafter into 2009. The Order relates that, for example, one trader stated in an email to a submitter: “We have another big fixing tom[orrow] and with the market move I was hoping we could set [certain] Libors as high as possible.”
In addition, certain Barclays Euro swaps traders, led at the time by a senior trader, coordinated with and aided and abetted traders at other banks in each other’s attempts to manipulate Euribor, even scheming to impact Euribor on key standardized dates when many derivatives contracts are settled or reset.
The traders’ requests were frequently accepted by Barclays’ submitters, who emailed responses such as “always happy to help,” “for you, anything,” or “Done…for you big boy,” resulting in false submissions by Barclays to the BBA and EBF. The traders and submitters also engaged in similar conduct on fewer occasions with respect to Yen and Sterling LIBOR.