Rumours of Libor rigging emerged in 2007, Hayes jury hears

Libor-rigging trial of Tom Hayes hears of banks' efforts to appear solvent by rigging submissions during crisis

Tom Hayes

The deputy chief executive of the British Bankers' Association, Sally Scutt, told Southwark Crown Court today (June 4) that the industry group heard reports of Libor-rigging from September 2007 onwards, but decided not to act because of the rate's centrality to the financial markets. "There were all these rumours" that banks were submitting inaccurate London interbank offered rates (Libor) to boost the perception of their borrowing ability – "I think confidence is absolutely critical to the running of the markets," she told the jury. But, as the financial crisis worsened, "people weren't sure whether banks remained creditworthy".

She was appearing as an expert witness in the trial of former UBS and Citigroup trader Tom Hayes, who has been charged with eight counts of conspiracy to defraud, to which he has pleaded not guilty. The charges relate to events between 2006 and 2010 when, prosecuting counsel Mukul Chawla argued, Hayes conspired with a large number of individuals at banks and brokers to rig the Japanese yen Libor rate.


The Bank of England put the BBA in charge of Libor in 1986, but the process has now been overhauled and in 2014 the Intercontinental Exchange group took over its running. In 2008, the BBA responded to concerns about Libor-rigging by saying it saw "no desire for changes other than those which would reinforce the stability and current methodology of the index".

The jury has heard that Hayes had a "strategic and co-ordinated plan" of enlisting brokers and traders at his and other banks to influence the Libor submitters of other banks. To do this, Hayes's brokers would either talk to submitters directly or adapt their email-distributed "run-throughs" – which contain a recommended Libor rate, supposed to be based on accurate market feedback – to reflect Hayes's wishes, according to the prosecution.

The BBA regularly sent revised terms of interest to panel banks in 2009 and 2010, as a reminder of accepted practice and to reinforce the definition of Libor, which always remained the same, said Scutt.

Included in one of these instruction papers was a stipulation that "contributor banks shall input their rate without reference to rates contributed by other contributor banks".

Scutt told the jury: "That means a bank must make its own decision about the rate at which it can borrow funds ... based entirely on their own bank view ... it has to be the rate that the bank's cash desk believes will be their rate that day."

Yesterday (June 3) the court heard a transcript of Hayes telling Serious Fraud Office investigators in 2013 that he would "tweak [Libor] around the edges", but he distanced his actions from what he called the "solvency issue" between 2008–2009, which involved banks "effectively lying about their position", he said.

"All the banks were doing it," he said in an interview, explaining that senior management were keen to use Libor to portray a sense of strength, and often asked their submitters to substantially move it to create the illusion that they were financially healthier than they actually were.

Hayes claimed that the manipulation of Libor was an "open secret" and went "pretty high up" at UBS, with one senior manager even attending a morning meeting in Tokyo when it was discussed.

Last week Chawla told the jury that Hayes "almost had to fight his own bank's fixes" in order to make Libor benefit his trading book.

The defence is due to cross-examine Ms Scutt tomorrow morning. The trial continues.

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