Six brokers accused of Libor rigging will see their trial begin in London today and could face decades in jail as the second instalment of the Serious Fraud Office’s (SFO) war on financial misconduct gets underway.
The six brokers – who have worked at ICAP, RP Martin and Tullett Prebon – are charged with helping traders rig benchmark rates.
In August, trader Tom Hayes became the first person to be convicted over the Libor rate-rigging scandal. Hayes was sentenced to 14 years in prison in August for manipulating the rate while working at UBS and Citigroup between 2006 and 2010.
The focus of the SFO’s investigation has now evolved from the role of the traders to that of brokers. Terry Farr and James Gilmour, former brokers at RP Martin, Danny Wilkinson, Darrell Read and Colin Goodman, ex-brokers at ICAP, and Noel Cryan, formerly of Tullett Prebon, all face charges of conspiracy to defraud, which has a maximum sentence of 10 years. All have pleaded not guilty.
Libor is the rate at which banks lend to one another, and the SFO claims that the accused conspired to move the benchmark up or down to suit them.
The trial, to be heard at Southwark Crown Court, could between 12 and 14 weeks, and will be heard by Mr Justice Hamblen.
On the back of the Hayes conviction, City lawyers expect more cases to be brought forward as part of the Libor probe. Sarah Wallace, partner at Irwin Mitchell, told City A.M. in August that the SFO would likely display a “renewed vigour” after Tom Hayes was sentenced.
“I think they will be confident right now that they are doing the right thing, certainly with respect to the City,” she said.
SFO director David Green has said that Hayes’ 14-year prison sentence was “part punishment, part deterrent”.
Banks paid billions in fines over the scandal. Deutsche Bank was forced to pay £1.7bn in April, the biggest to date. Barclays, UBS and Rabobank were also hit with mammoth fines.
S&P’s analysts forecast that the total cost of litigation could reach £19bn for UK banks alone.
Fines and litigation fees could hit banks’ profits, according to ratings agency Moody’s, which recently downgraded its outlook on the UK banking sector to “negative”.
Although Barclays, HSBC, RBS and Lloyds have made “adequate provisions”, the agency warns that fines could still hit the balance sheet.
“They continue to weigh on the four largest banks’ profitability, and to a lesser extent on Santander UK,” said Laurie Mayers, associate managing director of Moody’s financial institutions group.
Update: This article has been amended to remove a reference to RBC