The Libor and Euribor scandal flares up once again. On March 27, after a decade of proceedings, a British appeal court created a surprise by confirming the conviction of two traders, Tom Hayes and Carlo Palombo, accused of having manipulated these interbank interest rates between 2005 and 2009, which serve as a reference for a large part of the financial markets. This decision confirmed the United Kingdom’s special place in this matter: no other jurisdiction in the world condemns the action of these brokers, since an American court exonerated them in January 2022. The French and German courts have , they also, for a long time, considered that there was no criminal wrongdoing.
And now the three founders of Euribor themselves are making their dismay known. The British Court of Appeal’s judgment was based on an interpretation “false and incorrect” of the rules that they have written, write in a joint letter Helmut Konrad, Nikolaus Boemcke and Jean-Pierre Ravisé, Friday April 19.
“Not only is it a judicial error, but it is a tragedy for the condemned”, testifies Mr. Boemcke. In total, the lives of thirty-seven traders were turned upside down by the various trials, nineteen having been convicted and nine imprisoned. Tom Hayes, a former UBS and Citigroup broker, received an eleven-year prison sentence, and spent more than five years behind bars, without ever stopping proclaiming his innocence. Carlo Palombo was sentenced to four years in prison and attended his wife’s birth by telephone.
A turning point that sets precedent
At the material time, Libor and Euribor were determined every day at 11 a.m., when a panel of banks reported the rate at which they lend or borrow from each other. An average was taken. But inside the banks, traders were also betting on these same interest rates, creating a possible conflict of interest: banks could be tempted to submit a slightly higher or lower rate, depending on their commercial interest. .
In 1998, when Euribor was created, the three authors of the code of conduct took this problem into account. “We created a panel of 64 banks, some needed money, others wanted to lend, and the interests of each canceled out. That they took their commercial interest into account was perfectly normal”explains Mr. Boemcke.
British justice decided otherwise. In the case of Tom Hayes, a judge ruled in 2015 that his business interest was prohibited from being considered. It was a turning point, which now sets precedent. On March 27, the Court of Appeal not only upheld this approach, but went further. According to her, the rates that traders had to submit every day at 11:00 a.m. had to be ” the lowest ” possible.
You have 37.35% of this article left to read. The rest is reserved for subscribers.