The British Bankers’ Association was told that banks were lying about Libor submissions to suit their trading positions as early as 2007, according to evidence at a London criminal trial.
“I am starting to receive more and more comments and queries on the levels at which rates are currently setting,” BBA libor director John Ewan said in a November 2007 email sent to Libor panel banks which was shown to jurors in London yesterday.
“Currently these queries are coming largely from hedge funds, non-contributor banks, and the occasional broker.”
The emails came to light on the eighth day of the trial of former UBS Group and Citigroup trader Thomas Hayes, who is accused of eight counts of conspiracy to manipulate the London interbank offered rate.
BBA deputy chief executive Sally Scutt was being questioned about the lobby group’s oversight of the rate by defence lawyers.
Mr Ewan requested feedback from the banks and received several responses that detailed some bankers’ concerns that competitors were submitting rates that suited trading bets.
“Many institutions set their Libors based on their derivative reset positions,” Philip Rawlins, a treasury employee at Bank of Scotland, said in a December 6, 2007, message.
The messages were shown to the jury by lawyers for Mr Hayes, who has said that knowledge of Libor manipulation was widespread.
Mr Hayes, 35, worked at Zurich-based UBS from 2006 through 2010, when he moved to Citigroup.
Another response, cited as an example “a large Swiss bank whose Libors are quoted by its interest rate swaps desk. That puts their pricing for Libor against the off balance-sheet positions and has nothing to do with cash,” Martin Lawson at BNP Paribas SA wrote in an undated e-mail to Mr Ewan.
Libor was at the time calculated from a survey of banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies.
The following year the BBA published a report into Libor, shown to the jury yesterday, which didn’t mention the possibility that banks had been manipulating the rate for profit and suggested only minor changes to the way the rate was overseen.