Latest news with #Libor
Yahoo
26-05-2025
- Business
- Yahoo
Rate 'rigging' traders say they were scapegoated - now the Supreme Court will decide
The Supreme Court is poised to rule on the cases of two former City traders jailed for rigging interest rates, amid concerns raised by senior politicians that there may have been a series of miscarriages of justice. If the traders are successful in their application - which is opposed by the Serious Fraud Office (SFO) - it could lead to the quashing of all remaining convictions secured in nine criminal trials. Tom Hayes, a former trader at the Swiss bank UBS, became the first banker to be jailed for "rigging" interest rates in August 2015. He was accused at the age of 35 by the United States Department of Justice and the Serious Fraud Office of being a "ringmaster" of an international fraud conspiracy and sentenced to 14 years in jail. Together with former Barclays trader Carlo Palombo, he is now awaiting a crucial Supreme Court judgement. Hayes and Palombo were among 37 City traders prosecuted for "manipulating" the interest rate benchmarks Libor and Euribor, which track the cost of borrowing cash between the banks and are used to set the interest rates on millions of mortgages and commercial loans. In criminal trials on both sides of the Atlantic from 2015 to 2019, 19 were convicted of conspiracy to defraud and nine were sent to jail. As they served time, evidence emerged that central bankers and government officials across the world, including a top adviser at 10 Downing Street at the time, had pressured banks such as theirs to engage in very similar conduct to what they were jailed for – but on a much greater scale. No central banker or government official was prosecuted. Then, soon after they were released after serving their full jail tariffs, a US appeal court decided such conduct wasn't a crime after all; nor even against any rules. The US Department of Justice revoked the charges against Tom Hayes, and the US courts then threw out all similar convictions. Yet in the UK, they remain convicted criminals. The Serious Fraud Office, which prosecuted the cases, says the defendants were convicted of conspiracy to defraud and points to a number of previous unsuccessful attempts to overturn convictions at the Court of Appeal. The Supreme Court's now being asked to decide if judges were wrong to tell juries their conduct was unlawful. If it does so, it could lead to the overturning of all remaining convictions, throwing a global 17-year scandal into reverse. It's also likely to prompt renewed calls for a public inquiry into evidence of much larger interest rate "rigging" – ordered from the top of the financial system by central banks and governments worldwide. This is the first time the cases have reached the Supreme Court following public pressure from senior politicians, including former shadow chancellor John McDonnell and former Brexit Secretary David Davis. They have told the BBC they're concerned the traders have been "scapegoated" in a scandalous series of miscarriages of justice that runs "deeper than the Post Office". They want a public inquiry. What the FTSE 100 or the Dow Jones are to share prices, Libor is to interest rates: an index, updated every day, that tracked the cost of borrowing cash between the banks from 1986 until 2024. Each day at 11am, 16 banks across London would answer a question: at what interest rate could they borrow money? Before answering, traders on the banks' cash desks would look at the range of interest rates at which other banks on the market were offering to lend cash, which normally differed from each other by just one or two hundredths of a percentage point (e.g. HSBC offering to lend funds at 3.14%, Bank of China at 3.16%, JP Morgan at 3.15%). Each bank would then select a rate from that range of offers to submit as their answer. An average would then be taken to get the official benchmark, Libor (London Interbank Offered Rate). A similar process was used to get Euribor, the equivalent of Libor for euros. The evidence against Hayes and Palombo were messages they had sent to the cash traders asking them to select a 'high' or 'low' rate from that range, depending on what might benefit their banks' trades – which went up or down in value linked to Libor (or Euribor). Their requests might make no difference to the average; or they might nudge it very slightly in their bank's favour – up or down by no more than one eighth of one hundredth of a percentage point (0.00125%). But it was seen as worth the effort of making the requests, which had been industry practice for years, in case it might help their bank make more money or lose less. Prosecutors alleged Hayes was dishonestly seeking to manipulate the Libor rate to benefit the bank's trading positions and therefore his bonuses while "cheating" others trading on the market, "motivated by pure greed". The SFO accused Palombo of being a "crook" and a "cheat" who had "left his moral compass at home". The traders protested that any potential gains to their bonuses from a nudge to Libor of a maximum 0.00125% were far too little to motivate a criminal conspiracy. What they saw as the clerical task of choosing 'high' or 'low' rates based on the commercial interests of the bank - was merely what every bank had done since the 1980s, long before they started work. But according to the SFO, it was interest rate "manipulation" that amounted to evidence of an international conspiracy to defraud. At his 2015 trial, Hayes said he had not asked for any false answers to be given to the Libor question – but merely tried to ensure his bank selected a commercially advantageous rate from the range of accurate interest rates at which it could genuinely borrow. But the judge, Mr Justice Jeremy Cooke, decided that any attempt to take into account commercial interests when submitting a Libor rate was "self-evidently" unlawful. Sentencing Hayes to 14 years, he dismissed the argument that it was City practice. "The fact that others were doing the same as you is no excuse, nor is the fact that your immediate managers saw the benefit of what you were doing and condoned and embraced it, if not encouraged it.[…] The conduct involved here must be marked out as dishonest and wrong and a message sent to the world of banking accordingly." The defendants say court rulings retrospectively criminalised not only their actions years before, but also those of senior bankers and civil servants, much higher up the financial pecking order, who had sought to influence Libor on a much greater scale. Audio recordings, documents and data uncovered by the BBC indicate that in the 2008 financial crisis, governments and central banks from the Bank of England to the Banque de France and Banca d'Italia pressured banks to push Libor and Euribor down artificially in order to make real interest rates appear lower than they were and quell speculation about banks' solvency - a highly commercial motive. The difference, though, was that whereas the traders were asking for shifts of one hundredth of a percentage point, the central banks sought moves up to 50 times the size, giving rates that were obviously false, far away from the range of interest rates where cash was being borrowed or lent on the money markets. In a BBC Radio 4 podcast series exposing the scandal, The Lowball Tapes, Palombo asks despairingly, "If that's not criminal, how can I be a criminal?" Contemporary emails and phone transcripts, official interviews by the FBI and first-hand accounts of witnesses point to the involvement of top officials at Downing Street and the Treasury. They were not shown to the juries at the traders' trials. Palombo describes his life since being prosecuted as a "Kafka nightmare" where he could barely understand the accusations made against him, with no sense of having done anything even vaguely wrong. To him and to Hayes, one of the most serious implications is that what happened to them could happen to anyone in the workplace - to them, if normal commercial practice can be retroactively criminalised, no-one can be sure that the daily tasks they're currently engaged in at work won't, in years to come, be condemned and prosecuted. The Treasury has said it did not seek to influence individual bank Libor submissions. The Bank of England has said Libor was not regulated at the time. The Banque de France, Banca d'Italia and the Federal Reserve have declined to comment. In the traders' cases the Court of Appeal, led by judges including Lord Chief Justice John Thomas and Lord Justice Nigel Davis, blocked the path to the Supreme Court five times from 2015 to 2019. In 2021, the Criminal Cases Review Commission (CCRC) initially said it would turn down Hayes's application. But then in January 2022 a US appeal court fully acquitted two former Deutsche Bank traders, Matt Connolly and Gavin Black, saying prosecutors had failed to produce any evidence they had asked for false rates to be submitted at which their banks could not borrow. All US convictions for 'rigging' Libor were subsequently thrown out. The pair had initially been convicted in 2018 on similar charges to Hayes and Palombo. The following year, the CCRC was persuaded to change its mind. In 2024, Court of Appeal judges certified, for the first time in these cases, that there was a point of law of general public importance at stake, finally clearing the path to the Supreme Court. Two months ago, the Supreme Court heard arguments that judges in the lower courts had told juries that Hayes and Palombo's requests were wrong as a matter of law – when it should have been left as a matter of fact for the jury to decide. The SFO told the court the defendants didn't challenge the jury directions at the time. Hayes and Palombo now await the Supreme Court's judgement. Jailed bankers appeal 'must' go to top court Jailed bankers appeal rate 'rigging' convictions Warning jailed bankers ruling could hit loan rate
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Business Standard
15-05-2025
- Business
- Business Standard
RBI pushes lenders to revive funding market vital for monetary policy
A dwindling borrowing market used mainly by Indian banks is showing signs of life as authorities champion its usage to lenders, according to people familiar with the matter. Average daily volumes in the interbank call market have climbed to their highest in about five years this month, despite a plethora of often more attractive alternatives. Officials at the Reserve Bank of India have been asking dealers at banks to use the facility to keep its relevance to monetary policy alive, the people said, who asked not to be named, citing private discussions. While overall money-market turnover has risen to an average $70 billion a day, interbank trades account for just 2 per cent of that, down from 20 per cent a decade ago. That's as non-bank players like mutual funds and insurers use other venues for funding, contributing to the market's waning significance. The call money market is a vital component of India's financial plumbing, allowing the central bank to gauge how well its interest rate changes are being reflected in the broader economy. Shrinking volumes threaten to disrupt this process, weakening the link between policy rates and real-world borrowing costs, and by extension, the pricing of key financial derivatives. 'The weighted average call rate is the best operational target for monetary policy, despite dwindled share of call market volumes in overnight markets,' said Abhishek Upadhyay, an economist at ICICI Securities Primary Dealership. 'It represents the balance between demand and supply of bank reserves that is controlled by the RBI.' An email sent to the RBI seeking comment on the matter wasn't immediately answered. Daily average volumes in the call market are about Rs 16,490 crore ($1.9 billion) so far this month, Bloomberg-compiled data show. That's the highest in more than five years. Volumes reached 200 billion rupees on May 5, the highest since March 2020. To be sure, reviving the market comes at a cost: unsecured borrowing is typically more expensive and exposes lenders to credit risk. The trend away from the bank-to-bank call market isn't unique to India. Since the 2008 financial crisis and the stricter banking rules that followed, several countries embraced secured markets. For instance, the US replaced the scandal-hit Libor with the Secured Overnight Financing Rate. In India, the transition comes as players like mutual funds and insurers — whose assets have ballooned since the pandemic — are borrowing in the secured funding markets such as repo. The waning impact of the interbank rate has reduced the effectiveness of its link to the policy rate, making it harder to price loans and other financial products. This has spurred the central bank to push for a new benchmark — the Secured Overnight Rupee Rate (SORR) — which may eventually replace the Mumbai Interbank Outright Rate for pricing derivatives. The transition will depend on liquidity building up in the products tied to the new rate, according to the RBI. About 86 per cent of India's Rs 100 trillion outstanding in interest interest rate derivatives are overnight indexed swaps, tied to MIBOR, according to the central bank. The SORR, based on secured overnight repo trades that account for 98 per cent of activity, offers greater reliability and transparency.
The Guardian
27-03-2025
- Business
- The Guardian
City trader jailed for Libor rigging says he was convicted in a ‘morality trial'
The City trader jailed for Libor rigging in 2015 has said he believes he was convicted during a 'morality trial' of bankers' conduct, as he concluded his fight to clear his name at the UK's highest court. Speaking after a three-day hearing at the supreme court in London on Thursday, Tom Hayes said his original conviction a decade ago was a reaction to the 2008 financial crisis and a jury guided by a 'judge who had made his mind up about me'. 'Finally we had a fair tribunal that listened to the arguments. I hope they come up with a just decision,' the former UBS and Citigroup trader said. Hayes, 45, served five-and-a-half years in prison for rigging Libor, a benchmark interest rate once used in the financial markets to underpin more than $350tn of loans and securities. The scandal led to fines of almost $10bn for a dozen banks and brokerages. The court of appeal last year upheld the guilty verdict, saying there was 'indisputable documentary evidence' that he had sought to move Libor and that he had made 'frank admissions of dishonesty' – arguments repeated by the Serious Fraud Office during the latest hearing. However, Hayes's counsel, Adrian Darbishire KC, argued that there had been a 'core error' underpinning the case that marked a 'failure to respect the limits of the role of the judge in a jury trial'. The judge's original directions had 'entered territory that has to be left to the jury,' Darbishire told a panel of five senior judges in London. 'What happened in the Hayes case was not consistent with well established principles of English law.' The jury was wrongly instructed by the trial judge that the rules for the rates setting process prohibited considering the bank's commercial interest before making their submissions, Hayes's lawyers argued. The trader has also said he was prevented from submitting evidence of his daily profit and loss accounts in his original trial, which he says would have undermined the prosecution's case that he profited personally. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion A ruling overturning his conviction could lead to several others being quashed in the UK.
Bloomberg
27-03-2025
- Business
- Bloomberg
Ex-UBS Trader Tom Hayes Manipulated Libor to Boost Profit, SFO Says
Ex- UBS Group AG star trader, Tom Hayes, agreed to manipulate and rig Libor to dishonestly boost profits, prosecution lawyers said asking the UK's top court to reject attempts to overturn his conviction. The Supreme Court appeal over the conviction of Hayes and ex-Barclays Plc trader Carlo Palombo for rigging Libor and Euribor will come to an end on Thursday. The judges will have to weigh whether the Britain's first and most high profile criminal trial over rate rigging was unfair.
Yahoo
25-03-2025
- Business
- Yahoo
Former bank trader Tom Hayes in Supreme Court appeal to clear his name after extraordinary LIBOR downfall
Convicted white-collar criminals can normally hope to spend their time inside in low-security prisons reserved for non-violent offenders. But the reality was starkly different for former City trader Tom Hayes, who received a 14-year prison sentence at Southwark Crown Court in August 2015 for his role in the Libor interest rate rigging scandal. At one stage he found himself sharing a cell at maximum security HMP Belmarsh, not with fellow middle-class fraudsters, but with 'two guys who had assassinated someone with a Mac-10 machine gun'. The unlikely trio were locked up together for 23 hours a day, his cellmates watching 'terrible television' round the clock. Eventually Hayes plucked up the courage to ask for a turn on the remote. 'They came back and said I could watch half an hour a night. For my first half hour I chose Have I Got News For You.' It is safe to say his cellmates were 'unimpressed by Paul Merton and Ian Hislop'. It is just one of the extraordinary recollections of the 45-year-old former UBS and Citibank trader who was handed one of the toughest penalties for white-collar crime in British criminal justice history. After losing at the Court of Appeal last year he is now turning to the Supreme Court for a final shot at redemption. Hayes admits he spent much of his time behind bars — five and a half years in total — burning with rage at his downfall. Maybe I was naïve, but right up until the very end I thought I would be acquitted Tom Hayes The charges against him stemmed from his work in Tokyo as an interest rate derivatives trader for Swiss bank UBS, between August 2006 and September 2009, and then at Citibank until September 2010. Hayes was charged with, and then convicted of, eight counts of conspiracy to defraud by unlawfully manipulating the yen Libor (London Interbank Offered Rate), an interest rate set daily after submissions by big banks on their expected borrowing charges. The criminal indictment arrived in 2013, but came squarely on the back of the 2008 global economic crash and the feverish 'let's hang the bankers' atmosphere that followed, he says. At the centre of his appeal is an argument that the judge wrongly told jurors that Hayes's Libor submissions could not seek a commercial advantage for his bank and — at the same time — be within the rules. There is palpable anger from Hayes when he talks of how 'ignorant' politicians viscerally turned the public against the banking industry after the financial crash, describing it as a 'witch trial'. 'People like to blame somebody for something. And nobody really got blamed for 2008. There was rightful anger about that — but they were looking in the wrong place.' He told The Standard: 'My brokers actually used to get in trouble for not taking me out enough, for not doing enough entertaining'. Hayes says his life was a world away from the 'Wolf of Wall Street' cliché of 'hookers, champagne and cocaine'. Hayes once asked to go to KFC when offered his choice of London fine dining and insists most days, 'I went home early, had a bath and a glass of orange juice, and went to bed.' He grew up in Chiswick, west London, his parents divorced when he was four-years-old, and he was uprooted at 12 to live in Winchester in Hampshire. A prodigious talent for maths at primary school allowed him to race through textbooks for older children. He appreciated the 'great certainty' that the subject offers. 'There's no ambiguity in numbers', he said, before bristling at a E grade he once received for a history essay. 'It seemed so unjust because I thought I was completely just in making the arguments that I'd made – but I can't argue with that grade because it's a subjective grade. In maths, you don't get subjectivity.' At the end of his first year at Nottingham University, Hayes was pouring pints at a private members' tennis club and saddled with a sizeable student overdraft. He needed money and got his first taste of finance with an internship at UBS. Hayes has been diagnosed with mild Asperger's syndrome and gained unkind nicknames such as 'Rain Man' and 'Kid Aspergers' from trading floor colleagues, who also dubbed him 'Tommy Chocolate' owing to his fondness for a hot chocolate instead of a lunchtime pint. His habit of wearing the same clothes for days on end after a particularly successful trade, hoping to keep that lucky streak going, had the unfortunate effect of making him look like a 'tramp' — despite making a small fortune in wages and commissions. 'I'd look like I'd been dragged through a hedge backwards,' he says. Hayes enjoyed the mathematical certainty of finance, and says he constantly sought 'approval from my manager' although this was measured in his profit and loss account. At trial, this was turned against him, as prosecutors painted him simply as someone with a 'desire to earn and make as much money as he could'. Hayes knows he made mistakes during his trial. He asked to be tried alone, rather than alongside the other traders accused of being part of the same conspiracy. They were all cleared at their own trial. 'That was a big, big, big mistake,' he says, looking to the floor. And he accepts he did himself few favours in the witness box in front of the jury. 'I was so angry about what happened to me,' he says. 'That made me an angry witness and a defensive witness, and not a very likable witness.' He adds: 'I wish maybe I'd been more human in front of the jury. I don't think I came across as a sympathetic figure.' Hayes was also hamstrung by the fact he had initially co-operated with investigators, sitting down for 82 hours of interviews which were later used against him. He was, he says, in a 'mentally broken state' and did anything he could to avoid being extradited to the US, where separate charges had been filed. But the damage had been done to the presentation of his case when it came before a London jury. In an hour-and-a-half talking to The London Standard, Hayes slows down when recalling the moment the jury foreman repeated the word 'guilty' eight times, and he realised for the first time that a lengthy prison stretch was coming. 'Maybe I was naïve, but right up until the very end I thought that I would be acquitted,' he says. He had even been researching holiday destinations as the jury deliberated. 'I thought that this was just a big misunderstanding and it needed to be explained', he said. But guilty verdicts were delivered on a Monday afternoon in August 2015 after two and a half years on bail. Hayes was given just 30 minutes to say his goodbyes before Mr Justice Cooke jailed him. 'That sentencing was cruel. It was cruel in the way that he did it', he said. 'I remember standing in this little room and just feeling so stressed out. I didn't know what my sentence was going to be. My sister was there, she was crying.' He believes the way the sentence was handed out so quickly was toughest on his son, Joshua, then three, whom he had dropped off at nursery only that morning. His wife Sarah had to explain that evening that Hayes would not be around because of 'something he had done at work'. Hayes' gradual yet dramatic slide into the abyss took him from a comfortable family life and a well-paid job in the financial industry to sharing a prison cell with two other men at maximum-security Belmarsh Prison. For a man who relied on certainty in his daily life, there was little he could be sure of anymore. 'Every time someone said to me, that will never happen, or this is the worst case, it got worse than the worst case and it did happen', he says, rattling through a stream of broken reassurances as he lost his job, a regulatory inquiry turned into a criminal probe, charges were laid in two countries, and ultimately he was handed double the seven-year sentence he had been warned about. Hayes says he dealt with prison in 24-hour blocks, thinking, 'can I get through the day?' As well as his TV-addicted cellmates, Hayes got to know and indeed became friendly with Danny Jones, one of the 'Diamond Wheezers' Hatton Garden burglars, as they packed tea together. Jones turned to him for 'smart legal ideas' that he might be able to use in the next criminal case he faced. And Hayes came across one of the terrorists who plotted to blow up an airliner with liquid explosives disguised as soft drinks. He was 'very well read, very bright' after a decade in prison, and still extremely devoted to his faith. 'But he wasn't what I would describe as an extremist any more,' he adds, matter-of-factly. 'I mean, who am I to say? But I actually liked him.' He is candid about mixing with robbers and murderers, and making real friends, to the point of going back to jail to visit some who remain incarcerated. 'You cannot in prison judge people by what they're in for, because otherwise you wouldn't speak to anybody. Nobody wants to be judged by the worst act in their life.' Hayes has found solace over the years with stories about miscarriages of justice. The first book he managed to read behind bars was Amanda Knox's Waiting to be Heard, detailing her own journey through the Italian justice system while accused of Meredith Kercher's murder. Hayes got in touch with Knox after regaining his freedom to thank her for the inspiration. They now swap occasional messages and he hopes to be exonerated as she was. He says he complained stridently while locked up, battling for every right that he could scrape. Hayes's now ex-wife Sarah, a corporate lawyer, was by his side throughout the criminal trial, including the dramatic moment when he was sentenced to 14 years. 'We'll appeal', she mouthed across the courtroom, and the sentence was later cut to 11 years. But as he was nearing the end of his time in prison, Sarah broke the news that their marriage was over. 'It was a crushing thing for me because I always thought I'm going back to my home, I'm going back to my son, I'm going back to my wife,' he says. 'That was my beacon of hope … And then suddenly with about 15 months of my sentence left, I had this new reality.' Hayes was released in January 2021, having recently also been diagnosed with multiple sclerosis. His banking wealth was seized as proceeds of crime. He is now living in his parents' property in Maida Vale, west London. He has focused on rebuilding his relationship with his son, taking him to watch QPR play each week and reconnecting with nature. 'Just going down to the beach in St Ives, feeling the sand underneath my feet, seeing those crashing waves … When you've been stuck in a concrete box for five and a half years that's been very healing.' Hayes says he still battles every day with anger, but adds hopefully: 'I'm much calmer now, much less angry now than I was at my most extreme points. I think I have righteous anger now.' A conversion to Christianity in prison has helped. At first he used religion to get away from the jailhouse noise for a while, but it's now a true devotion. Hayes has taken to online dating since the separation from Sarah, but he also has pessimistic calculations of his odds of finding a match: 75 per cent put off by the 'drama' of his life, and 12.5 per cent he must turn down because they think an ex-con is 'really cool'. 'I'm selling myself: 'Come out of prison after five and a half years, in therapy, quite mentally broken, living in my parents' flat. I've had all my assets stolen. I'm on the autism spectrum, I've just been diagnosed with multiple sclerosis.' Oh yeah, that's my CV. 'I'm fishing in my small pond with a rod that's broken, and bait that's not very good.' His Supreme Court appeal comes after a referral from the Criminal Cases Review Commission, which concluded there was a reasonable chance of the convictions being overturned. He had seen his colleagues cleared at their trial — 'I was in a conspiracy of one,' he rues. Traders who were found guilty of Libor rigging in the US had their convictions quashed by the courts, who agreed with a point Hayes makes: attempting to gain a commercial advantage within the system doesn't add up to a crime. His appeal starts on Tuesday, and when the court returns a decision Hayes hopes he has something a little brighter to tell those online dates and new acquaintances. But win or lose in the courts, he will always carry the trauma of becoming the human face of the financial crash. Sign in to access your portfolio
