Libor scandal shows pressures on 'honest brokers'

Wed Sep 25, 2013 6:09pm EDT
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By Carmel Crimmins and Clare Hutchison

DUBLIN/LONDON (Reuters) - Evidence that interdealer brokers at ICAP conspired to rig Libor for a bank trader raises questions over such firms' role as honest go-betweens among banks and highlighted the pressure customers can put on them.

Documents released by Britain's Financial Conduct Authority (FCA) on Wednesday when it and U.S. authorities fined ICAP, three of whose former brokers face U.S. criminal charges, show staff feared to expose manipulation by a bank trader for fear of losing the client's business.

"I am obviously totally reliant upon business and need to fall into line with his wishes," one ICAP broker was quoted as telling another in an email.

"I think if brokers brought everything to then the brokers would end up having no clients," he added.

ICAP was the first interdealer broker to be fined in the sweeping international investigation into how traders misled the compilers of daily Libor surveys in a conspiracy to skew the resultant rates in ways from which they could profit.

Two former employees of smaller broker RP Martin are facing criminal charges in Britain over the Libor affair.

The role of the brokers is to match buyers and sellers among banks across a range of financial instruments, from basic bonds and currencies to derivative products, such as swaps. The brokers take a commission for arranging the trades.

"They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility," said U.S. Attorney General Eric Holder.   Continued...

A sign is seen on an ICAP office in the City of London September 25, 2013. REUTERS/Toby Melville