The Blotter: Rabobank hit with Libor charges, $475 million fine

Also, AlphaMetrix ordered to liquidate funds, shutters trading

Rabobank to pay $475 million to settle Libor and Euribor charges 

The U.S. Commodity Futures Trading Commission (CFTC)  issued an order against Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank), bringing and settling charges of false reporting and attempted manipulation of the London Interbank Offered Rate (Libor) for U.S. Dollar, yen and sterling, and of the Euro Interbank Offered Rate (Euribor) and charges of successful manipulation of yen Libor. The CFTC also settled charges that Rabobank, at times, aided and abetted the attempts of derivatives traders at other banks to manipulate yen Libor and Euribor. These violations, which spanned nearly six years, involved more than two dozen employees working out of six offices on three continents. Rabobank is obligated to pay a penalty of $475 million, and the company is ordered to take further steps to ensure the integrity of its Libor and other benchmark interest rate submissions in the future.  

David Meister, director of enforcement stated, "The CFTC has now charged five global financial institutions for Libor manipulative schemes, with nearly $1.8 billion in penalties imposed by the Commission alone. The sheer number of institutions and individuals involved in these cases reflects a truly shocking and brazen degree of unlawfulness, warranting the historic enforcement response we bring forth today and in our prior cases."


Rabobank was one of the global banks that submitted borrowing rate information on a daily basis for use in the calculation of Libor for various currencies and for Euribor. Rabobank also traded and held cash and derivatives positions whose value depended on these same benchmarks.

From at least mid-2005 through early 2011, Rabobank traders engaged in hundreds of manipulative acts undermining the integrity of U.S. dollar and yen LIBOR, Euribor and, to a lesser extent, Sterling Libor. The violations took various forms:

 ·Rabobank traders, some of whom doubled as Libor and Euribor submitters, regularly made and accommodated their fellow traders’ requests to make favorable rate submissions to benefit their trading positions through attempts to manipulate U.S. dollar and yen Libor and Euribor.  On occasion, they did the same with respect to sterling Libor. Making submissions that were, as some Rabobank employees said at the time, “ridiculous,” “obscenely high” and “silly low,” more than two dozen traders, including several desk managers and at least one senior manager located in Rabobank’s New York, London, Utrecht, Tokyo, Hong Kong, and Singapore offices engaged in this wrongful conduct or knew it was ongoing at the time but did nothing to stop it.

 · At times, Rabobank was successful in its attempts to manipulate yen LIBOR.  In fact, the misconduct with respect to yen LIBOR was so entrenched that as traders assumed the role of submitter, their predecessors would train them on the unlawful practices.

 · Rabobank also, at times, aided and abetted other banks’ attempts to manipulate yen Libor and Euribor, including coordinating with an interdealer broker on yen Libor submissions to aid the manipulations of the senior yen trader at UBS AG. As one senior Rabobank employee put it: “You know, scratch my back, yeah, and all,” to which the broker observed, “Yeah oh definitely, yeah, play the rules.”

 The CFTC order further finds that Rabobank ignored the obvious conflict of interest it created by assigning traders with trading positions tied to LIBOR and Euribor to serve as Rabobank’s Libor and Euribor submitters. Submitters were improperly left to choose between their responsibility to make an honest assessment of borrowing costs and their desire to maximize the profitability of their trading positions. Here, Rabobank’s submitters often resolved the conflict in favor of profit.  This conflict was exacerbated by traders and submitters sitting together so that traders could simply shout requests for unlawful submissions across the trading desk. Rabobank thus provided these employees with unfettered opportunities to attempt to manipulate LIBOR and Euribor for profit, and the traders took advantage of those opportunities. The order also finds that Rabobank otherwise lacked sufficient controls around the LIBOR and Euribor submission process and failed to adequately supervise its traders and submitters.

 According to the order, this manipulative conduct occurred even after the Commission had commenced its investigation of Rabobank’s U.S. dollar LIBOR practices in April 2010, when Rabobank received the Commission’s request that the Bank internally investigate its U.S. dollar Libor practices.  In late 2010, after Rabobank submitters refused, as instructed by a manager, to consider a trader’s requests for particular Yen Libor submissions, the Rabobank trader promptly obtained the assistance of an interdealer broker to continue attempting to manipulate yen LIBOR to benefit his trading positions through early 2011.

 The CFTC requires Rabobank to pay a civil monetary penalty of $475 million, cease and desist from its violations of the CEA, and adhere to specific undertakings to ensure the integrity of its Libor and other benchmark interest rate submissions in the future. The Order also recognizes the significant cooperation of Rabobank with the Division of Enforcement in its investigation.

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