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London - Britain's Lloyds Banking Group has agreed to pay fines totalling $370m to US and British authorities investigating its part in a global interest rate rigging scandal and manipulating fees for a UK government lending scheme.
The settlement is the seventh joint penalty handed out by American and British regulators in connection with the attempted manipulation of the London interbank offered rate, or Libor, and other similar benchmarks used to price around $450trn of financial products worldwide. The misconduct related to Libor rates for sterling, the US dollar and Japanese yen.
The penalties for Lloyds comprise a $178m fine by Britain's Financial Conduct Authority (FCA), $105m by the US Commodity Futures Trading Commission and a $86m fine by the US Department of Justice.
The FCA said there had been routine manipulation of sterling Libor submissions to benefit money market trading positions between September 2006 and June 2009.
To avoid negative media comment and market perceptions of its financial strength, Bank of Scotland, which Lloyds later acquired, manipulated Libor submissions as a result of at least two management directives in September and October 2008, the FCA said.
It said that in September 2008, just after the collapse of Lehman Brothers sparked a global meltdown in markets, a manager instructed a trader to lower dollar Libor submissions.
"I've been pressured by senior management to bring my rates down into line with everyone else," a third trader said.
Emails uncovered by the FCA showed traders seeking to peg Libor quotes to "suit the books". The FCA said there was a culture among traders of seeking to take a financial advantage wherever possible.
For example, on 19 July 2007 when a Lloyds manager was informed by a Lloyds trader about a request made to another Lloyds trader for a low rate, the trader commented that "every little helps... It's like Tesco's", repeating an advertising slogan used by Britain's biggest retailer.
The Lloyds manager replied "Absolutely, every little helps".
Lloyds was rescued by a 20.5-billion-pound government bailout during the financial crisis after a government-engineered takeover of HBOS turned sour. Taxpayers still hold a 25% stake in the bank five years later.
Lloyds' settlement follows British rivals Barclays and Royal Bank of Scotland, which agreed to pay fines of $453m and $612m respectively in 2012 and 2013.
Highly reprehensible
The FCA said the total UK fine included 70 million for attempting to manipulate fees payable to the Bank of England for the firm's participation in the special liquidity scheme (SLS), a taxpayer-backed government initiative to support British banks during the financial crisis.
The FCA fine included a 30% discount for early settlement.
Britain's financial regulator said sixteen individuals at Lloyds, seven of them managers, were directly involved in or aware of the various forms of Libor manipulation, including one manager who was also involved in the repo rate misconduct.
"Their behaviour involved a gross breach of trust and we condemn it without reservation," Lloyds Chairman Norman Blackwell said on Monday.
The Bank of England said Lloyds has paid it 7.8 million pounds in compensation for the reduction on the amount of SLS fees it received as a result of manipulation.
Lloyds' behaviour was "highly reprehensible and clearly unlawful", the BoE said in a statement.
In a related action, the US Department of Justice (DOJ) entered into a deferred prosecution agreement with Lloyds, deferring criminal wire fraud charges in exchange for Lloyds continuing to cooperate and agreeing to an $86m penalty.
Shares in Lloyds barely moved on the news, which had been widely flagged, and were up 0.1% at 74.9 pence at 14:50.
