Lloyds not off hook yet after $370 million Libor fines

Mon Jul 28, 2014 12:44pm EDT
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By Matt Scuffham and Huw Jones

LONDON (Reuters) - Lloyds Banking Group (LLOY.L: Quote) could face further punishment after agreeing to pay fines totaling $370 million for its part in a global interest rate rigging scandal and for attempting to manipulate fees for a government lending scheme to help banks.

The settlement is the seventh joint penalty handed out by American and British regulators in connection with the attempted manipulation of the London interbank offered rate, or Libor, and other similar benchmarks used to price around $450 trillion of financial products worldwide.

But it is the first penalty for attempting to fix so-called "repo" rates to reduce fees for a taxpayer-backed scheme set up by the Bank of England to support British banks during the 2008 financial crisis.

This special liquidity scheme (SLS), launched in 2008, was an attempt to free up banks' balance sheets and boost confidence in the financial system. It enabled banks to exchange hard-to-trade mortgage assets for government bills.

Bank of England Governor Mark Carney said in a July 15 letter to Lloyds' chairman Norman Blackwell the attempted manipulation could lead to criminal action against those involved.

"Such manipulation is highly reprehensible, clearly unlawful and may amount to criminal conduct on the part of the individuals involved," Carney wrote.

He said Britain's financial regulator would consider whether further action should be taken against Lloyds or the individuals involved. Any criminal action against individuals would be taken by Britain's Serious Fraud Office, which declined to comment.

Britain's Financial Conduct Authority said the abuse of the SLS had been a novel feature of Lloyds' case.   Continued...

A sign is seen outside a branch of Lloyds Bank in central London February 3, 2014.      REUTERS/Luke MacGregor