Corporate Whistleblowers In Europe

Trigger

On 11/22/2013, I read an article in the Wall Street Journal of the same day titled “UBS to Avoid Fine in EU Libor Probe” (subscription only).

According to this article, UBS and Barclays, PLC will be granted immunity by the EU authorities for cooperating in their misguided LIBOR scandal investigations.

Apparently also Canada and other national authorities have granted some kind of immunity to UBS.

Corporate Whistleblowers?

EU rules in grant immunity to corporations in cartel cases to encourage corporate wrongdoers to self-report collusion.

Does this remind you of special witness protection or immunity granted to witnesses in organized crime case? Are such drastic measures necessary in alleged business collusion cases? I think not!

What we have here is that in a highly competitive industry like the banking sector those who are first to profess to cooperate in some fashion and deliver whatever damaging evidence the prosecutor is looking for go free and the rest of the competitors will be indicted and have to pay the fines?

Very nice indeed!

Fight!

I strongly recommend that all other banks should take the fight to the EU Commission instead of accepting their punishment!

So far it seems only Credit Agricole, HSBC, and surprisingly J. P. Morgan (who just accepted $14 billion fine) may opt to fight back.

Previous, Related Blog Post

See here.

LIBOR Manipulation Scapegoat

Trigger

Today (10/30/2013), I read another article (German language) about the alleged manipulation of the all-important LIBOR interest rate by commercial banks. This time it is about e-mails exchanged between traders etc. of the Dutch Rabobank and other banks involved.

Since the so called LIBOR scandal surfaced, I have read numerous articles about it. Therefore, I wanted to write a blog post about this subject. In this blog post, I will try to summarize instead of supporting every argument with facts etc.

Prosecutors And The General Public Have No Clue About Traders

Yes, the language used in those published emails is very suggestive of all kinds of malfeasance. Simple minded people like many prosecutors jump to conclusions when they read stuff like this.

Traders are very peculiar people not unlike philosophers or poets, but quite different. They too live in a different world. Most of them are fairly young people. I don’t want to excuse any trader, but I suppose the language is something like vent for their stress at work or a kind of can do attitude or else. I could probably say more about the psyche of traders, but for sake of brevity I leave it at that.

Everybody Knew For Many Years That The LIBOR Was Prone To Manipulation

The method that, I believe is still employed, to determine the LIBOR rate of the day is very primitive and is based on the participation of a selected number of banks. It relies on submitted quotes at a particular time of day.

The Method To Determine LIBOR On A Daily Basis Was Totally Outdated

Why in the 21st century, everybody still relied on such an outdated method is simply incomprehensible. For at least a decade, exchange rates are quoted round the clock even in sub-minute intervals. Even amateur individual traders can get real time quotes delivered to their home computer at any time of the day.

One could have simply sampled these quotes multiple times a day to come up with close of day LIBOR rate, which would have been much less subject to any manipulation.

Opportunity Makes The Thief/Trader

It follows from the discussion above that this totally outdated method was an opportunity for traders to potentially manipulate the LIBOR. However, the financial industry is highly competitive, though over regulated and over supervised by big government, that any extensive manipulations in one direction or so over possibly an extended time period are quite impossible to persist.