Cooperatieve Rabobank U.A.

FCA action

fine

1

in fines

£105.0m

most recent

October 2013

• Fined £105m on 31 October 2013

  1. On 29 October 2013, the FCA imposed a penalty of £105 million on Cooperatieve Centrale Raiffeisen-Boerenleenbank B. A. Rabobank for breaches of Principles 5, 3 and 2, relating to LIBOR misconduct. Were it not for the Stage 1 settlement discount, the penalty would have been £150 million. Attempted LIBOR manipulation 2. Between May 2005 and January 2011 Relevant Period, Rabobank breached Principle 5 by failing to observe proper standards of market conduct. Its LIBOR Submitters routinely took trading positions in interest rate derivatives into account when making JPY, USD and GBP LIBOR submissions. Rabobank also sought to influence the JPY and USD LIBOR submissions of panel banks. Twenty six individuals seven of whom were managers were directly involved in or aware of, these improper requests. Two other managers ought to have known of and stopped the requests. 3. First, Rabobank Traders routinely made requests to Rabobank Submitters to adjust submissions to benefit trading positions. From May 2005 to November 2010, Traders made at least 508 JPY, USD and GBP requests. Traders also discussed their trading positions with Submitters and made oral requests to Submitters. Submitters who were money market traders also made submissions to suit trading positions. 4. Second, Rabobank colluded with panel banks to make JPY and USD LIBOR submissions that benefited trading positions. From June 2005 to October 2008, at least one Rabobank Trader and one Rabobank Submitter made at least 12 documented requests to at least two individuals from another panel bank. From June 2006 to October 2008, at least one Rabobank Submitter took into account at least seven requests from at least two individuals at two other panel banks. 5. Rabobank also colluded with brokers to attempt to influence the JPY LIBOR submissions of panel banks. Between May 2009 and January 2011, at least one Rabobank Trader made at least 12 JPY LIBOR requests to at least four Brokers at two firms. From July 2008 to September 2008, at least one Rabobank Submitter took into account at least 14 documented requests from one broker at one firm. Systems and controls failings 6. For the following reasons, Rabobank breached Principle 3 by failing to take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems in relation to its LIBOR submissions process: a. Between May 2005 and 30 March 2011 Rabobank did not have specific systems, controls or policies governing its LIBOR submissions process. b. Between May 2005 and August 2012, Rabobank allowed Submitters to trade derivatives products referenced to LIBOR, ignoring the risk this caused. c. Rabobank sat Traders closely to Submitters, ignoring the risk this caused until July 2012. d. From 2009 to November 2010, Rabobank instructed JPY LIBOR Submitters to seek market colour from certain JPY Traders to inform their submissions. This created the risk that those Traders would seek to influence those Submitters. Compliance and internal audit failings 7. First, on 18 March 2011, Rabobank attested to the FCA that its LIBOR-related systems and controls were fit for purpose. Although Rabobank's work on its LIBOR policy was largely complete by the time it gave its attestation, the attestation was inaccurate because at the time of the attestation, Rabobank had not: yet formally implemented its policy; failed to address the risk created by a allowing submitters to trade products linked to the LIBOR rates for which they are responsible; and failed to retain sufficient records to allow the bank to audit submissions. 8. Second, between March and April 2009, Rabobank's Internal Audit group audited the group where Submitters and certain Traders sat. They were advised by a JPY LIBOR Submitter that JPY LIBOR submissions were based on the suggestions a JPY Trader provided. Despite noting this, Internal Audit failed to assess and address the issueffectively