US Authorities Fine Société Générale $475 million for Libor Rigging

SocGen’s managers reported false lower ‎rates that were used to set the Euro and ‎U.S. dollar Libor‎.

French bank Société Générale has reached a $475 million ‎settlement in a class action suit alleging that its managers ‎conspired to manipulate a global benchmark interest rate known ‎as Libor, according to a CTFC filing.‎

The settlement made public on Monday resolves antitrust ‎and other claims against the bank which was pleased to ‎have resolved the agency’s investigations into legacy ‎activities, according to a Société Générale spokesman.‎

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The indictment states that between May 2010 through ‎mid-2012, certain members of SocGen’s executive management, including the ‎CFO, head of investment banking and Treasury ‎managers reported false lower rates that were used to set the Euro and ‎U.S. dollar Libor.‎

According to the indictment, the scheme aimed to protect the lender’s ‎reputation after outside analysts drew attention to higher-than-average interest rates Société Générale had been reporting.‎

The documents detailed how the bank was able to borrow ‎funds at lower rates than was justified. The actions ‎allegedly led to incorrect calculations in the LIBOR rate ‎for the US dollar as the four top, and four bottom ‎submissions from the various banks were ignored in its ‎calculation.‎

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The rates affected the calculation of pricing in futures ‎contracts, including that of the EuroDollar, various swaps, ‎and other financial products affecting $170 million worth ‎of financial products during the period.‎

Managers concerned as false reports continue

The indictment said that in about June 2010, the bank’s managers became ‎concerned that the false reports could catch the attention of financial ‎regulators, and suggested treasury executives to begin to increase ‎the reported rates to match the actual borrowing rate. ‎ Nonetheless, the false U.S. ‎Dollar LIBOR submissions continued until July 2012 while fabricated Euro LIBOR ‎and Euribor submissions were in place until July 2010.‎

The CFTC’s statement further explains: “Members of Société Générale’s Treasury Desks ‎expressed discomfort and concern about Société Générale’s submission ‎practices.  “We have increased our market funding levels without moving our ‎LIBOR contribution I think we are leaving ourselves exposed to a possible ‎claim of market manipulation … I am extremely uncomfortable with this ‎situation.”  Certain members of executive management were informed that ‎submissions did not match what the Bank was paying in the market, being told ‎at one point, “we remain in breach,” “we’re very far away from reality,” and ‎‎“we’re in cloud cuckoo land with our contributions.”

Financial watchdogs across the globe have been probing ‎banks’ rigging of Libor and similar benchmarks that are ‎used to indicate interest payments for several financial ‎products. The investigations centered around an alleged ‎plot among major banks to manipulate Libor to benefit ‎their own trading positions.‎

German banking giant Deutsche Bank and its UK ‎subsidiary were fined last year a record a $775 million for ‎rigging interest rates in a multi-bank conspiracy that ‎undermined global financial markets.‎

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