The fallout from the LIBOR manipulation scandal continues to attract headlines across the globe, particularly as the LIBOR investigations themselves appear to have triggered separate  enquiries into the alleged manipulation of other benchmark rates. Investigations into various  financial institutions are continuing and further eye-catching fines, along the lines of the USD  370 million paid by Lloyds Banking Group in July 2014 (see below) are anticipated. In the meantime,  regulatory focus is now shifting towards individuals, and we therefore consider it likely that  LIBOR will remain in the news for the foreseeable future. In this article, we look at recent developments in LIBOR actions internationally.

Regulatory investigations

Lloyds Banking Group is the latest financial institution to be fined by US and UK regulators for  its participation in the manipulation of benchmark rates, which include, amongst others, LIBOR. In  July 2014, Lloyds Banking Group agreed to pay fines totalling USD 370 million, which comprised fines imposed by the Financial Conduct  Authority (“FCA”) (GBP 105 million), the US Commodity Trading Commission (USD 105 million) and the  US Department of Justice (USD 86 million). The Bank of England Governor, Mark Carney, described the manipulation by Lloyds Banking Group as “highly reprehensible” and “clearly unlawful”. In the wake of the fine, at least four traders at  Lloyds Banking Group have been suspended and, according to press reports, the financial institution is investigating the involvement in the scandal of approximately twenty  individuals.

In June 2014, the European Commission issued a Statement of Objections to interdealer broker ICAP,  which alleged that ICAP “may have breached EU antitrust rules by facilitating several cartel infringements in the market for interest rate derivatives denominated in the yen currency”. ICAP has denied such allegations and has confirmed that it will “defend itself against these allegations  vigorously”. ICAP will now respond to the Statement both in writing and at a hearing before representatives of the European Commission  and national competition authorities. This course of action follows the imposition of a EUR 669.9  million fine by the Commission on six financial institutions in December 2013 for their  participation in cartels relating to interest rate derivatives which derive their value from LIBOR.

Martin Wheatley, head of the FCA, confirmed in July 2014 that while investigations were still  ongoing into the manipulation of LIBOR, such investigations were not as serious as those which have  now concluded. However, at least some of the on-going LIBOR investigations appear to have been delayed on the grounds that the allegations in issue extend beyond the manipulation of  LIBOR, and therefore the mere fact that the LIBOR allegations may be less serious should not be  taken as meaning that substantial fines will not follow.

According to press reports, BaFin, Germany’s financial regulator, is expanding its investigation  into Deutsche Bank’s alleged participation in the manipulation of LIBOR and other benchmark rates.  BaFin’s initial intention was to conclude its investigations by Summer 2014, but the expansion of  the investigation is now likely to delay the publication of its findings.

Regulatory fines imposed to date

Click here to view the table

Criminal prosecution of individuals

In June and August 2014 respectively, two former Rabobank traders, Takayuki Yagami and Paul Robson,  pleaded guilty to one count of conspiring to commit wire fraud and bank fraud before US District  Judge Rakoff. These two individuals are the first to plead guilty to charges involving the  manipulating of benchmark rates, and another two former Rabobank traders, Paul Thompson and Tetsuya  Motomura, continue to plead not guilty to the same allegations. Rabobank has previously paid fines totalling USD 325 million to US regulators  in relation to manipulation charges.

The SFO’s investigations into the involvement of individuals in the manipulation of LIBOR continue.  To date, criminal charges have been brought by the Serious Fraud Office against twelve former  traders (from UBS, Barclays, RP Martin and ICAP) for the manipulation of LIBOR, with the first  trial listed for January 2015.

Litigation against institutions

Numerous lawsuits have been filed in the United States relating to LIBOR manipulation. Of  particular interest  is the suit filed by Jeffery Laydon, against a number of financial institutions, in the US District Court., Southern District of New York (Jeffrey Laydon et  al v Mizuho Bank Ltd et al). Mr Laydon alleges that he suffered losses on futures contracts that were manipulated by  various international banks.

In March 2014, US District Judge Daniels granted the defendants’ motion to dismiss antitrust,  vicarious liability and unjust enrichment claims brought by Mr Laydon. However, the judge also  granted Mr Laydon leave to  amend his complaint, to include allegations that the banks violated the  Commodity Exchange Act by manipulating yen-denominated interest rate benchmarks between 2006 and 2010. The lawsuit seeks to rely on information taken from the various notices accompanying  the regulatory fines imposed on financial institutions over the past two years.

In the UK, there have so far been two key cases concerning claims in respect of LIBOR-based products – Graiseley Properties Limited & Ors v Barclays Bank plc  (2012) and Deutsche Bank AG v Unitech Limited (2013). The Graiseley  claim was brought by various  parties within the Guardian Care Homes Group, which entered into agreements with Barclays for an  interest rate swap and an interest rate collar, as hedges to loans of GBP 41 million and GBP 29  million. The Deutsche Bank claim is in fact two actions being heard together. In the first, a  syndicate of banks seeks repayment of a USD 150 million loan made to Unitech Global Limited, and in  the second, Deutsche Bank seeks to recover around USD 11 million allegedly due from Unitech Global  under an interest rate swap purportedly entered into as a hedge of its interest liabilities under  the loan  agreement.

Following protracted interlocutory skirmishes regarding pleading amendments, in November 2013, the  Court of Appeal allowed both sets of claimants to amend  their particulars of claim to include  allegations of misrepresentation in connection with LIBOR and/or the swaps/collars. The Graiseley  case settled earlier this year before it was due to go to trial, but the Deutsche Bank claim  continues and will be monitored closely by others considering LIBOR-related claims.


While the focus of the litigation and investigations appears to have shifted to individuals it  would seem that the height of the LIBOR scandal has now passed. Even once LIBOR passes, however,  its legacy will cast long shadows over financial institutions for years to come. The LIBOR scandal  has spurred on global investigations into the manipulation of numerous other benchmarks, including  foreign exchange rates, oil and precious metals, and as yet there is no end in sight. We expect to  see rate-fixing investigations, and the consequent 9 and 10 figure fines, hitting the headlines for the foreseeable future.