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.
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.