Lloyds Banking Group has agreed to pay 226 million pounds in fines to U.S. and U.K. regulators for an attempted rigging of key benchmark interest rates and manipulating fees for a UK government lending program, becoming the seventh financial institution to agree to a settlement during the global Libor investigation.
The lender, bailed out by British taxpayers during the global financial crisis, will pay $178 millions (105 million pounds) to Britains Financial Conduct Authority, $86 million to the U.S. Department of Justice and $105 million to the U.S. Commodity Futures Trading Commission. The total U.K. fine includes a 70-million-pound penalty for trying to manipulate fees payable to the BoE for the lenders participation in a government-backed scheme. The U.S. fines relate to the Libor rigging.
The company paid 7.8 million pounds to Bank of England as a compensation over the manipulation involving submissions for a borrowing benchmark called the three-month “GBP Repo Rate”, which was used to determine fees for the “Special Liquidity Scheme” – a taxpayer-backed government program to support British banks during the financial crisis. Four traders manipulated the GBP Repo Rate between April 2008 and 2009, reducing the fees banks would have to pay under the SLS.
The Bank of England said in a statement: “The Bank put the SLS in place to help banks get through the worst of the financial crisis. That Lloyds and Bank of Scotland, the largest beneficiaries of this assistance, manipulated their three-month GBP Repo Rate submissions to reduce fees is highly reprehensible and clearly unlawful.”
Lloyds settlement follows an agreement by British competitor Barclays to pay penalties amounting to $453 million (290 million pounds) in June 2012, becoming the first financial institution to settle after the Libor-scandal bursted. Royal Bank of Scotland reached an agreement to pay $612 million in 2013. Still, all three British lenders penalty sums fell well back behind UBS AGs $1.5-billion settlement in 2012.
Britains FCA said that sixteen individuals at Lloyds, seven of which managers, were involved or at least were aware of the attempted Libor misconduct, while one manager played a role in the “GBP Repo Rate” malpractice.
Lloyds Chairman Norman Blackwell said in a statement: “The actions of these individuals between 2006 and 2009 are completely unacceptable. Their behavior involved a gross breach of trust and we condemn it without reservation.”
The British lender said that the individuals involved in the manipulations have been suspended or subjected to disciplinary proceedings, which will likely also include clawing back bonuses from former employees.
Lloyds Banking Group Plc fell by 0.39% to 74.52 pence by 14:27 GMT, marking a one-year change of +8.97%. The lender is valued at 53.39 billion pounds. According to the Financial Times, the 25 analysts offering 12-month price targets for Lloyds Banking Group PLC have a median target of 87.00 pence, with a high estimate of 120.00 pence and a low estimate of 55.00 pence. The median estimate represents a 16.29% increase from the last price of GBX 74.81.
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