Rabobank Facing Near-US$1bn Fine to Settle Libor Charges

Dutch group Rabobank will pay a fine of nearly US $1bn to resolve regulators’ claims that it attempted to manipulate interest rates, including the benchmark London interbank offered rate (Libor), according to reports.

The settlement could be announced early next week and would resolve complaints from the US Commodity Futures Trading Commission (CFTC) and Justice Department, the UK’s Financial Conduct Authority (FCA) and Dutch regulators, the reports suggest.

Rabobank would become the latest European bank to pay a financial penalty in order to resolve accusations that its traders attempted to rig Libor. In July 2012,
Bob Diamond resigned as chief executive officer (CEO) of Barclays Bank
 after the bank was fined US$452m for its role in manipulating Libor. Last December, Switzerland’s
UBS reached a US$1.5bn settlement
, the largest to stem from the investigation so far, with authorities in the US, UK and Switzerland.

In February 2013 the UK’s
Royal Bank of Scotland (RBS) was fined US$610m
 by UK and US regulators for making hundreds of attempts to rig rates between 2006 and 2010. More recently ICAP, the world’s largest broker of transactions between banks, was fined US$88m last month.

The latest reports suggest that Rabobank’s fine would resolve claims related to attempts to manipulate a benchmark rate for Japanese yen (JPY). The settlement had been delayed because of the US government shutdown earlier this month that limited support staff available to work the deal.

Heavier Penalty

Commenting on the reports, Andre Spicer, professor of organisational behaviour at London’s Cass Business School, said: “It may seem like Groundhog Day with another big bank being fined for allegedly manipulating Libor. But the near US$1bn fine levelled against Rabobank deserves attention. The fine is huge – about three times the size of fines levelled against UK banks caught fiddling the rate. This is a sign regulators around the world are no longer toothless tigers.

“The fine reminds us that the driver of bad behaviour was trader culture, not just greedy shareholders. Unlike the other big banks fined for Libor, Rabobank is a co-op. This means its traders were not being pushed by the same kind of capitalist discipline to show huge returns. Rather they were being fuelled by a culture shared by traders across the industry which encouraged them to win at any cost.

“Rabobank has already taken drastic action. It has stopped paying bonuses. This will surely not be popular among many traders. But severing the roots of unethical practices will not just require change in one organisation. It will need a change across the whole industry.”

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