The Commodity Futures Trading Commission (CFTC) has fined Societe Generale (SocGen) $475 million, and the US Department of Justice (DOJ) another $275 million, for attempted manipulation of and false reporting in connection with the London Interbank Offered Rate (LIBOR) and Euro Interbank Offered Rate (Euribor).
More specifically, the CFTC accused the French bank of attempted manipulation of and false reporting in connection with the LIBOR for US Dollar, Yen and Euro, and the Euribor, certain instances of manipulation of Yen LIBOR, and aiding and abetting traders at another bank in their attempts to manipulate Euribor.
This misconduct apparently spanned more than six years, from 2006 through mid-2012.
James McDonald, CFTC director of enforcement, comments: “Today’s action shows the CFTC’s continued commitment to ensuring the integrity of global benchmarks that impact the US markets. During the course of these Libor investigations, we have seen some market participants knowingly make false reports in an effort to increase their trading profits or misrepresent their financial health. But we also have seen the Commission and its staff work tirelessly to identify this misconduct, root out the bad actors, and to ensure those responsible are held accountable.”
The CFTC order finds that the bank engaged in misconduct that undermined the integrity of LIBOR and Euribor for two distinct purposes.
From May 2010 through mid-2012, during a period of market strain due to the Greek sovereign debt crisis, the bank made false reports of US Dollar and Euro LIBOR and Euribor to protect its reputation from speculation that it was having more difficulty borrowing unsecured funds than other banks.
It says that SocGen made these false reports at the direction of certain members of executive management, including the CFO and head of corporate investment banking, as well as senior treasury managers, including the global head of treasury.
At other times, the bank made false reports concerning US Dollar, Yen and Euro LIBOR and Euribor in attempts to manipulate the setting of those benchmarks, and for Yen LIBOR was, at certain times, successful in its attempts to manipulate, in order to benefit trading positions that were priced based on LIBOR or Euribor, or in other words, for profit.
The CFTC order says the bank engaged in misconduct even after it knew that the agency was investigating its Euribor and LIBOR submission practices as of July and September 2011. And although in early 2012 the bank conducted an internal audit of its LIBOR submission process, the subsequent report was “anemic”, according to the CFTC and failed to identify glaring improprieties. Indeed, the report apparently concluded that the bank’s submitted rates were “consistent with” British Bankers’ Association guidelines, despite what the CFTC says was an abundance of evidence to the contrary.
In a related action, SocGen entered into a deferred prosecution agreement with the DOJ for violations of the Commodity Exchange Act for the same underlying misconduct and accepted a penalty of $275 million.