BARCLAYS chief executive Bob Diamond is to forgo his bonus after the bank was fined a total of £290m (€362m)for attempting to manipulate the key interbank borrowing rate Libor.
The US Commodity Futures Trading Commission (CFTC) handed the bank a $200m (£128m) penalty for "attempted manipulation of and false reporting concerning Libor and Euribor benchmark interest rates", while Barclays has agreed to pay a $160m penalty as part of an agreement with the US Justice Department.
The UK’s Financial Services Authority has imposed a penalty of £59.5m.
The CFTC found that finds that "Barclays attempted to manipulate and made false reports concerning two global benchmark interest rates, Libor and Euribor, on numerous occasions and sometimes on a daily basis over a four-year period, commencing as early as 2005".
Libor is used to price more than £200 trillion of financial products around the world, including everything from home loans to the most complex credit derivatives. Euribor measures the cost of borrowing in the European Union.
In a statement, Mr Diamond said that he and three other senior managers would hand back their bonuses for 2012 in light of the fines: "The events which gave rise to today’s resolutions relate to past actions which fell well short of the standards to which Barclays aspires in the conduct of its business. When we identified those issues, we took prompt action to fix them and co-operated extensively and proactively with the authorities.
"Nothing is more important to me than having a strong culture at Barclays; I am sorry that some people acted in a manner not consistent with our culture and values. To reflect our collective responsibility as leaders, Chris Lucas, Jerry del Missier, Rich Ricci and I have voluntarily agreed with the Board to forgo any consideration for an annual bonus this year."
The CFTC said that the attempts to manipulate Euribor "included Barclays’ traders asking other banks to assist".
One trader stated in an email to a submitter: “We have another big fixing tom[orrow] and with the market move I was hoping we could set [certain] Libors as high as possible.”
The CFTC statement continued: "In addition, certain Barclays euro swaps traders, led at the time by a senior trader, coordinated with and aided and abetted traders at other banks in each other’s attempts to manipulate Euribor, even scheming to impact Euribor on key standardized dates when many derivatives contracts are settled or reset."
The traders’ requests were often accepted by Barclays’ submitters, who emailed responses such as “always happy to help”, “for you, anything”, or “Done…for you big boy”.
The traders and submitters also engaged in similar conduct on fewer occasions with respect to yen.
The bank's settlement follows a three-year investigation into the allegations, which first surfaced in the months following the collapse of Lehman Brothers in September 2008.
In the months afterwards Barclays was identified as one of the bank’s making the highest submission to Libor. In its final notice, the FSA said senior managers at Barclays were worried about the “negative publicity” the bank was receiving, leading to orders being given by “less senior managers at Barclays to reduce Libor submissions”.
The regulator added that the origin of these instructions was “unclear”.
Senior managers even coined the phrase “head above the parapet” to describe high Libor submissions relative to other banks.
Barclays has already disciplined several staff in relation to Libor manipulation and the settlement is expected to see several more employees leave the bank. A spokesman for Barclays would not say how many staff were involved, but added that it was a “relatively small number”.
While Barclays current managers have agreed to give up their bonuses for last year, it is not clear what action the bank could take against former executives, in particular former chief executive, John Varley, who was in charge of the lender at the period under investigation.
Mr Varley is currently seen as one of the frontrunners for the governorship of the Bank of England.