<div id="header"><h1><a href="http://dealbook.nytimes.com/" title="Go to DealBook Home"><img src="http://graphics8.nytimes.com/images/blogs_v3/dealbook/dealbook_print.png" alt="DealBook - A Financial News Service of The New York Times"></a></h1>
<div class="ad"> </div></div><div id="dealbook"><div align="left"><span class="timestamp published" title="2012-08-05T21:37:49+00:00">August 5, 2012, <span>9:37 pm</span></span><h3 class="entry-title">As Libor Fault-Finding Grows, It Is Now Every Bank for Itself</h3>
<address class="byline author vcard">By <a href="http://dealbook.nytimes.com/author/azam-ahmed/" class="url fn" title="See all posts by AZAM AHMED">AZAM AHMED</a> <span>and</span> <a href="http://dealbook.nytimes.com/author/ben-protess/" class="url fn" title="See all posts by BEN PROTESS">BEN PROTESS</a></address><div class="entry-content">
<p>Major
banks, which often band together when facing government scrutiny, are
now turning on one another as an international investigation into the
manipulation of interest rates gains momentum.</p><p>With billions of
dollars and their reputations on the line, financial institutions have
been spreading the blame in recent meetings with authorities, according
to government and bank officials with knowledge of the matter. While
acknowledging their own wrongdoing, institutions are pointing out
actions at other banks that they believe are worse - and in some cases,
extend to top executives.</p><p>One official involved in the case said that banks are emphasizing that "we're not as bad as the next guy."</p><p>The Swiss bank <a href="http://dealbook.on.nytimes.com/public/overview?symbol=UBS&inline=nyt-org">UBS</a>,
which has a history of regulatory run-ins, has shared e-mails, instant
messages and other information suggesting it had colluded with traders
at <a href="http://dealbook.on.nytimes.com/public/overview?symbol=DB&inline=nyt-org">Deutsche Bank</a>, <a href="http://dealbook.on.nytimes.com/public/overview?symbol=HBC&inline=nyt-org">HSBC</a> and <a href="http://topics.nytimes.com/top/news/business/companies/royal-bank-of-scotland-group-plc/index.html?inline=nyt-org">the Royal Bank of Scotland</a>
to manipulate key interest rates, according to court documents and bank
employees. In talks with authorities, HSBC is providing its own account
of the activities, according to a lawyer briefed on the matter. <a href="http://dealbook.on.nytimes.com/public/overview?symbol=C&inline=nyt-org">Citigroup</a> has also detailed rate manipulation with other banks.</p>
<p>When the British bank <a href="http://dealbook.on.nytimes.com/public/overview?symbol=BCS&inline=nyt-org">Barclays</a>
recently negotiated a settlement with authorities, it highlighted that
other European institutions took part in the rate-rigging scheme, said
officials close to the case. Like UBS, Barclays has provided information
on activities involving HSBC and Deutsche Bank.</p><p>Several banks are using Barclays' $450 million settlement as a guidepost in preliminary discussions with authorities. <a href="http://dealbook.on.nytimes.com/public/overview?symbol=JPM&inline=nyt-org">JPMorgan Chase</a>
and Citigroup are each emphasizing to authorities that their chief
executives were not implicated in the wrongdoing as in the case of
Barclays, and therefore the banks deserve to be treated less severely,
according to the officials.</p><p>A Deutsche Bank manager who oversaw
traders is facing scrutiny, according to a person involved in the case.
However, a Deutsche Bank spokesman said no managers or top executives
had been aware of any rate manipulation, adding that the investigation
was continuing.</p><p>JPMorgan, Deutsche Bank, HSBC and Citigroup have said they are cooperating with officials.</p><p>Authorities around the world are investigating more than 10 big banks for their roles in setting global interest rates like the <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/l/london_interbank_offered_rate_libor/index.html?inline=nyt-classifier">London interbank offered rate</a>, or Libor. Such benchmarks underpin trillions of dollars of financial products, including mortgages and <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/s/student_loans/index.html?inline=nyt-classifier">student loans</a>.</p>
<p>Regulators
are examining whether banks colluded to move the rates up or down to
get extra profits and limit losses on their trading positions. Some
banks are also under investigation for reporting artificially low rates
to make themselves appear financially healthier.</p><p>When banks first
started conducting internal investigations at the behest of regulators
two years ago, they figured the potential penalties would be manageable,
according to bank officials.</p><p>But the size of the Barclays
settlement and the growing public outcry have left banks scrambling to
limit their culpability as the threat of criminal actions increases.
Part of the banks' problem is that their internal investigations have
created a road map that authorities are using to pursue criminal and
civil cases.</p><p>Those findings provide a detailed portrait of the wrongdoing.</p><p>Interviews
with dozens of government and bank officials who spoke on the condition
of anonymity because the investigation is developing, and a review of
court documents and regulatory filings show varying degrees of exposure.
Banks like UBS, Deutsche Bank and Citigroup uncovered that employees
had worked with traders at other firms to influence rates, according to
government and bank officials. A small number of institutions, including
<a href="http://dealbook.on.nytimes.com/public/overview?symbol=CS&inline=nyt-org">Credit Suisse</a> and <a href="http://dealbook.on.nytimes.com/public/overview?symbol=BAC&inline=nyt-org">Bank of America</a>, found more limited actions.</p>
<p>The extent of the evidence has created an every-bank-for-itself attitude.</p><p>The
financial industry often tries to negotiate a common deal to avoid
getting singled out for bad behavior. This year, five banks collectively
struck a multibillion-dollar agreement with federal authorities to
address <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/f/foreclosures/index.html?inline=nyt-classifier">foreclosure</a> abuses.</p><p>With
the rate investigation, institutions are not sharing information or
even discussing the case with rivals, according to lawyers involved in
the matter. In part, they do not want to appear to have close ties with
their rivals, since such cozy relationships are part of the government's
inquiry.</p><p>"There is no information-sharing among banks unlike the
past 15 years of federal investigations," said a lawyer involved in the
case.</p><p>So far, Barclays has borne the brunt of the fallout. In
June, the British bank settled with British and American authorities for
reporting false rates to bolster its profits and project a rosier
picture of its financial position. The settlement prompted the
resignation of top executives, including the chief executive <a href="http://topics.nytimes.com/top/reference/timestopics/people/d/robert_e_diamond_jr/index.html?inline=nyt-per">Robert E. Diamond Jr.</a>, and helped to erase more than $3 billion of the bank's market value.</p>
<p>At first, Barclays rejected a settlement offer by the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/c/commodity_futures_trading_commission/index.html?inline=nyt-org">Commodity Futures Trading Commission</a>,
the regulator leading the investigation, according to officials close
to the case. The bank believed the terms were unfavorable, said a lawyer
involved in the matter. As the agency prepared to take the case to
court, negotiations resumed. While Barclays secured a modestly smaller
penalty, the bank still paid record fines.</p><p>In trying to work out a deal, the British bank offered information on the multiyear scheme with Deutsche Bank, HSBC, <a href="http://dealbook.on.nytimes.com/public/overview?symbol=SCGLY&inline=nyt-org">Société Générale</a>
and Crédit Agricole, according to government and bank officials. Also, a
senior trader at Barclays tried to manipulate the Euro interbank
offered rate, or Euribor.</p><p>Other cases are expected to follow. The
Justice Department is aiming to file criminal actions against two banks
before the end of the year and is preparing to arrest former traders at
Barclays and other banks, according to government officials. In
addition, state attorneys general and local district attorneys have
approached the Justice Department in recent weeks, seeking a role in the
case.</p><p>Since the Barclays settlement, banks have been reassessing
their defense strategies and reaching out to authorities. Officials warn
that all talks with the banks are preliminary, and no settlement deals
are imminent.</p><p>After targeting Barclays for rate manipulation four
years ago, regulators gradually turned their attention to a wide swath
of banks.</p><p>In a 2010 letter, the Commodity Futures Trading
Commission contacted a small group of banks, including UBS. The
regulator quickly expanded the list, sending a memo to all 16
institutions that helped set Libor rates at the time. The agency ordered
the firms to hire outside attorneys to conduct an investigation into
suspected rate manipulation, according to bank and regulatory officials.</p><p>After
examining the extent of its wrongdoing, UBS moved swiftly to strike an
immunity deal with government authorities. In its inquiry, the Swiss
bank uncovered that one of its former traders, Thomas Hayes, had
apparently worked with employees at Deutsche Bank, HSBC and the Royal
Bank of Scotland to influence rates and make profits, according to bank
officials and court documents. At times, the traders communicated via
instant messages on Bloomberg machines, the court documents show.</p><p>UBS
was eager to cooperate in part because the government typically only
grants immunity to the first party to step forward in a case. The Swiss
bank also wanted to avoid the harsh spotlight of a prosecution or a
settlement, according to a bank official. The bank has been at the
center of several financial scandals, including a rogue trader and an
illegal tax shelter scheme.</p><p>Citigroup has been forthcoming with
regulators, as well. After leaving UBS, Mr. Hayes moved to Citigroup
where the problems continued, according to bank officials with knowledge
of the case. The bank has handed over documents on that rate-rigging
group.</p><p>Citigroup is emphasizing to authorities that the wrongdoing
did not reach the upper levels of management, as it did at Barclays.
Based on its internal investigation, the bank told regulators and its
audit committee that neither its chief executive, <a href="http://topics.nytimes.com/top/reference/timestopics/people/p/vikram_s_pandit/index.html?inline=nyt-per">Vikram S. Pandit</a>,
nor its chief financial officer, John Gerspach, was implicated,
according to a bank official and a lawyer with knowledge of the matter.
The bank's investigation showed that its wrongdoing is mainly centered
on another key benchmark, the Tokyo interbank offered rate.</p><p>In
contrast, Deutsche Bank is facing heavier scrutiny in the United States.
The German institution has been named in the rate conspiracies outlined
by Barclays and UBS, as has HSBC. In working with regulators, HSBC is
making employees available to government investigators and turning over
e-mails and other information, according to one person with knowledge of
the matter.</p><br clear="all"></div></div></div><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br><img src="http://users.moscow.com/waf/WP%20Fox%2001.jpg"><br>
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