Traders being investigated by U.K. regulators for the suspected rigging of global interest rates are unlikely to face criminal charges while their firms might suffer record fines, people with knowledge of the probe said.
The Financial Services Authority is scrutinizing evidence of attempted market abuse as well as failures in banks' systems and controls, which carry civil penalties, said the people, who declined to be identified because the inquiry is private. To file criminal charges in England, the regulator would need to show traders successfully manipulated the rate.
The FSA is among regulators looking into whether banks tried to manipulate the London interbank offered rate, the benchmark rate for $360 trillion of securities, to hide their true cost of borrowing, and whether traders colluded to rig the benchmark to profit from interest-rate derivatives.
“The FSA's enforcement mantra is 'credible deterrence,' which has increasingly involved the FSA taking criminal proceedings against individuals for market abuse,” said Owen Watkins, a financial services lawyer at Lewis Silkin LLP in London. “Given the size of the fines it is intending to levy against the firms involved, the FSA feels that civil action against the individuals is sufficient to achieve the required deterrent effect.”
Royal Bank of Scotland Group PLC, Citigroup Inc., UBS AG, ICAP PLC, Lloyds Banking Group PLC and Deutsche Bank AG are among firms that are being probed by regulators worldwide. Spokesmen for UBS, RBS, ICAP, Deutsche Bank and Lloyds declined to comment, while those for Citigroup didn't immediately return calls. Joseph Eyre, an FSA spokesman, declined to comment
The European Union, Canadian and U.S. antitrust regulators as well as the Swiss Competition Commission are probing whether firms acted anti-competitively. The U.S. Department of Justice is running a criminal investigation, according to court documents. Alisa Finelli, a Justice Department spokeswoman, declined to comment on the status of its probe.
The FSA expects to levy record fines on some of the 12 banks under investigation by the year-end, one of the people said. Firms have been cooperating to end the probe early, the people said.
Regulators are focusing on the lack of so-called Chinese walls between traders and employees making interest-rate submissions on behalf of their banks, and whether the banks' proprietary trading desks exploited the information they had about the direction of LIBOR to trade interest-rate derivatives.
