CFTC Settles Libor Case against Rabobank for $475 Million

In the Matter of Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., CFTC Docket  No. 14-02.  On October 29, 2013, the CFTC announced the filing of a Settled Order Instituting Proceedings against Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank” or the “Bank”) for the alleged false reporting and attempted manipulation of the London Interbank Offered Rate (LIBOR) and Euro Interbank Offered Rate (Euribor) for the U.S. Dollar, Yen and Sterling, and for the alleged manipulation of Yen LIBOR. According to the Order, Rabobank was one of the global banks that submitted borrowing rate information on a daily basis for use in the calculation of LIBOR for various currencies and for Euribor.  The Bank also traded and held cash and derivatives positions whose value depended on these same benchmarks.

The Order alleges that Rabobank traders accommodated requests to make favorable rate submissions to benefit their trading positions through attempts to manipulate U.S. Dollar and Yen LIBOR and Euribor.  According to the CFTC, more than two dozen traders, including desk managers and at a senior manager engaged in the or knew it was ongoing at the time but did nothing to stop it.  The CFTC also alleges that Rabobank was successful in its attempts to manipulate Yen LIBOR.   According to the CFTC, Rabobank also aided and abetted other banks’ attempts to manipulate Yen LIBOR and Euribor, including coordinating with an interdealer broker on Yen LIBOR submissions to aid the manipulations of the Senior Yen Trader at UBS AG.  According to the Order, this and other manipulative conduct occurred even after the CFTC had commenced its investigation of Rabobank’s U.S. Dollar LIBOR practices.

Without admitting or denying the charges, Rabobank consented to the Order and agreed to pay a civil monetary penalty of $475 million, cease and desist from its violations of Commodity Exchange Act, and adhere to specific undertakings to ensure the integrity of its LIBOR and other benchmark interest rate submissions in the future.  The Order acknowledges the cooperation of Rabobank with the Division of Enforcement in its investigation.

In related actions, the U.S. Department of Justice entered into a deferred prosecution agreement with Rabobank, deferring criminal wire fraud charges in exchange for Rabobank continuing to cooperate and agreeing to a penalty of $325 million; the United Kingdom Financial Conduct Authority issued a Final Notice regarding its enforcement action against Rabobank and imposed a penalty of £105 million (approximately $170 million); the Japanese Financial Services Agency issued an administrative action against Rabobank for failure of its internal controls within its Tokyo office; De Nederlandsche Bank took action by imposing remedial measures on Rabobank; and the Dutch Public Prosecutor’s Office agreed to a payment of €70 million (approximately $96.5 million) by Rabobank in order for Rabobank to avoid a criminal prosecution.

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