Hayes thought his Libor requests too small to be investigated, court hears

Didn’t take BBA inquiries into low-balling too seriously

Tom Hayes
Tom Hayes: on trial for Libor manipulation

In conversations shown at Southwark Crown Court today (June 30), Tom Hayes referred to rumours that the British Bankers' Association (BBA) would change the Libor-setting process as "hysteria", and cut short another trader discussing the low-balling investigation by quipping "not that old BBA chestnut again".

Hayes is on trial for the alleged rigging of the Japanese yen Libor between 2006 and 2010. He has pleaded not guilty to eight charges of conspiracy to defraud and has said the practice of influencing Libor submitters was widespread.

In interviews with the Serious Fraud Office in 2013, read out in court today, Hayes distanced himself from the low-balling of the dollar Libor between 2007 and 2009, which involved a number of banks lowering their daily Libor rates – which is the rate at which a bank perceives it can borrow from another bank – to make it appear that they were financially healthier than they really were.

Hayes told investigators he would only ever make requests for Libor to be tweaked "around the edges".

"[I'd say] 'I just need it on the low side', that typified my sort of approach." The requests were always justifiable, he said, as they were usually only a half to a few basis points.


When Hayes heard that the BBA was putting pressure on banks to raise their submissions to more realistic levels: "I thought well, these guys are investigating the fact that the banks' management are submitting Libors that are wrong, you know, they're not truthful."

The court was shown an instant chat conversation dated May 13, 2009, in which Deutsche Bank trader Guillaume Adolph tells Hayes: "We are dropping our Libor 20 bp [basis points] to 70, entre nous, today." Hayes responds "20bp?" and Adolph corrects himself "25 to be true."

Adolph also got in touch on June 4, 2009, to say: "The BBA is all over USD Libor again. My USD guy is the chairman of the Libor contributors. He is saying me that Libor should be where cash is trading, and not an hypothetical offer in good size of 3M depo." To which Hayes responded: "Not that old BBA chestnut again."

The court heard that leading up to this, the brokers that relayed Hayes's requests to their contacts at other banks were also growing nervous of the extra scrutiny on the Libor-setting process.

In 2008 the brokers, who cannot be named, had told Hayes that their emails needed to be worded more carefully when talking about Libor, because they were under pressure from their compliance department. Some began to refer to Libor in code, using terms such as "arbitrage" or "arby" instead.

They circulated a Bloomberg article published on April 16, 2008, which stated: "The British Bankers' Association said it will ban any member deliberately misquoting lending rates at daily money market operations amid concern that some contributors are providing misleading quotes."

In June 2009, rumour spread that the BBA would increase the number of banks on the submitting panel, which turned out to be false. Hayes had heard the rumour and called it "BBA hysteria" in an email shown to the jury today.

"I never gave a second thought about asking for Libor to be higher or lower," he told investigators. "Like I said, I honestly didn't think the rates we were submitting were outside of, like, where cash was trading."

If he needed a significant change to the yen fix in order for his trading book to benefit, he would try and convince a few submitters at different banks to stagger the change in their estimates over a number of days, the court heard today, rather than a drastic drop.

The trial continues.

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