Every day, each of us makes small requests of our colleagues. Could you send such-and-such a document? Would you mind giving me your thoughts on the following?
For some traders at the Royal Bank of Scotland, it appears, such routine requests included this question: might you try to manipulate a major interest rate for me so that I can make some more money?
What's striking about the employee communications detailed in Wednesday's settlement between RBS and U.S. authorities is just how casual and run-of-the-mill such favours were.
The employees receiving the requests were responsible for submitting the bank's daily estimate for a benchmark borrowing rate to a third party, together with other banks. By sending artificially high or low submissions, they could skew the final averaged result – and make their colleagues cash in the process.
Take for instance, this exchange, conducted by instant message in 2009:
Swiss franc trader: can we get high 3[month], low 6m pls!
Primary submitter: maybe
Swiss franc trader: PPPPLLLLLEEEEEAAAAASSSSEEEEEE
Primary submitter: ok 41 52
Swiss franc trader: perfect perfect
.
Or the following one, from 2010:
Former sterling cash trader: can i pick ur brain?
Primary submitter: yeah
Former sterling cash trader: u see 3[month] jpy libor going anywhere btween now and imm?
Primary submitter: looks fairly static to be honest, poss more pressure on upside, but not alot
Former sterling cash trader: oh[,] we hve a mutual friend who'd love to see it go down, no chance at all?
Primary submitter: haha [former UBS Yen Trader at Bank C] by chance
Former sterling cash trader: shhh
Primary submitter: hehehe , mine should remain flat , always suits me if anything to go lower as i rcve funds
Former sterling cash trader: gotcha, thanks, and, if u cud see ur way to a small drop there might be a steak in it for ya, haha
Primary submitter: noted ;-)
.
It's not as though the traders involved – in places like London, Singapore and Tokyo – didn't know that what they were doing was wrong. But there appeared to be a sense that everyone was doing it and that this is how the game was played.
Witness this conversation from back in 2007:
Senior Yen Trader: this libor setting is getting nutss
[…]
Bank A Trader: im puzzled as to why 3m libor fixing not coming off after the FED action
[…]
Bank B Trader: [UBS] is lending dolls through my currencies in 3 month do u see him doing the same in urs
[…]
Senior Yen Trader: yes[,] he always led usd in my mkt[,] the jpy libor is a cartel now
[…]
Senior Yen Trader: its just amazing how libor fixing can make you that much money
[…]
Senior Yen Trader: its a cartel now in london[.] they smack all the 1yr irs ..and fix it very high or low