CFTC Issues Order against Rabobank for LIBOR Manipulation (with Lofchie Comment)
The CFTC issued an Order against Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank"), bringing and settling charges of false reporting and attempted manipulation of U.S. Dollar, Yen, and Sterling LIBOR, and the Euro Interbank Offered Rate ("Euribor"), and charges of successful manipulation of Yen LIBOR.The CFTC also settled charges that Rabobank aided and abetted the attempts of derivatives traders at other banks to manipulate Yen LIBOR and Euribor. According to the CFTC Order, these violations spanned six years and involved more than two dozen employees.
Rabobank is obligated to pay a penalty of $475 million and is ordered to take further steps to ensure the integrity of its LIBOR and other benchmark interest rate submissions in the future. With this Order, the CFTC has imposed penalties of $1.765 billion on entities for manipulative conduct with respect to benchmark interest rates.
According to a statement made by CFTC Chairman Gary Gensler, this settlement marks the fifth instance of benchmark manipulative conduct, which "highlights the critical need to find replacements for LIBOR and Euribor - replacements truly anchored in observable transactions." Gensler stated that the Financial Stability Board will continue to look for alternatives, and the CFTC will work with the international community to achieve the "much needed reforms" on key interest rate benchmarks.
Lofchie Comment: Chairman Gensler and the CFTC have made clear that they do not take a positive view of LIBOR and related rates as benchmarks. It would be useful if the CFTC would put forth alternative proposals.
See: CFTC Order against Rabobank; Chairman Gensler's Statement; CFTC Press Release. See also: Example of Misconduct from Written Communications.Related news: CFTC Charges ICAP Europe Limited with Manipulation of Yen LIBOR (September 25, 2013); CFTC Chairman Gensler Remarks on Benchmark Interest Rates (April 22, 2013); RBS Fined £87.5 Million by FSA for LIBOR Failings (February 7, 2013); Barclays Hit with Substantial Fines for LIBOR and EURIBOR Misconduct (July 3, 2012).