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EURIBOR AND LIBOR: Defending Prosecutions by the SFO
01 Apr 2019
Article by:
Deepak Vij
Amirah Ajaz


Since 2015 the Serious Fraud Office has brought a series of prosecutions alleging the manipulation and rigging of the EURIBOR (the Euro Inter Bank Offered Rate) and LIBOR (“London Interbank Offered Rate”) indexes. The investigations have led to the arrest and charging of a large number of senior bankers and traders with nine individuals convicted as of March 2019 There has been global media interest in the various trials conducted at Southwark Crown Court.

LIBOR is the rate at which banks in London lend money to each other for the short-term in a particular currency. EURIBOR is the Eurozone’s equivalent of LIBOR. LIBOR rates are published daily for five currencies (CHF, EUR, GBP, JPY and USD) for seven periods or tenors (Overnight / Spot, 1 week, 1 month, 2 months, 3 months, 6 months and 12 months. LIBOR is often referenced in derivative, bond and loan documentation. The LIBOR rates, prior to the market manipulation scandal were based on estimates submitted by leading banks. The SFO prosecutions broadly alleged that traders and brokers deliberately and dishonestly sought to influence the rates the submitting banks tendered in order to gain an unfair advantage on positions on their trading books.

The banks involved were handed huge fines both in the UK and the USA. Barclays Bank for example was fined in the UK c.£60 million, which was at that time the largest ever fine to be imposed by the then Financial Services Authority (“FSA”) and $400 million by the US Commodity Futures Trading Commission. Notably none of the defendants in the UK prosecutions held board level or senior management positions but were drawn from the ranks of traders and brokers.

Various reviews by Parliament were conducted, including “The Wheatley Review of Libor”. The report’s recommendations led to a comprehensive review and reform of LIBOR. The review went on to further consider the adequacy of the UK’s current civil and criminal sanctioning powers with respect to financial misconduct and market abuse, specific to LIBOR and other benchmarks such as EURIBOR and TIBOR (Tokyo Inter-Bank Offered Rate”). This review involved financial regulators from around the globe including those from the United States, Canada, Japan, Switzerland and Europe.

In February 2014 the Intercontinental Exchange Benchmark Administration Limited took over the administration of the LIBOR from the British Bankers Association, changing it to the ICE LIBOR. As a result of the various reforms rates are now based on actual transactions, rather than the previous policy of using estimates.

Market reforms continue to address LIBOR’s shortcomings and in the US the New York Fed in conjunction with the Treasury Department have created a new rate called the Secured Overnight Financing Rate (“SOFR”). Reports this year suggest that if there is a switch off of LIBOR and other IBOR benchmarks in 2021 to transition to SOFR, there could be approximately $2 trillion in loans which may need to have their documentation revised. The Bank of England and the Federal Reserve is actively encouraging banks to move away from LIBOR due to a perceived “lack of accuracy”. However, it is being widely reported that many banks across the world, including on Wall Street and the global financial markets are unprepared and unsure of how it will come into practice.

Recent press reports of Court proceedings in the US suggest that reforms of LIBOR may not have been successful and a Connecticut based bank has alleged that ICE and the 18 banks that help set LIBOR have been intentionally depressing the benchmark through their submissions a practice known as “lowballing”. Given these recent developments there is a real prospect that the SFO may contemplate a new LIBOR investigation.

Where individuals are under investigation it is of paramount importance given the scale and complexity of these prosecutions that they access expert legal advice as early as possible. This is particularly so where the SFO has wide ranging investigative and coercive powers including compelled interviews. ABV have a team highly experienced in representing individuals being investigated for offences of serious fraud and have an unrivalled reputation for delivering strategic, focused and pragmatic criminal law advice to individuals facing high profile investigations. Colin Aylott QC who was part of the team that successfully defended R.P. Martin yen broker James Gilmour comments:


“My experience in successfully defending in the LIBOR Interdealer broker trial reinforced my view that those under investigation for market abuse offences need to instruct specialist fraud solicitors as early as they can. An early proactive approach aimed at formulating a clear strategy and establishing an immediate dialogue with the investigative authority invariably pays dividends. The serious fraud team at ABV are experts in their field and are highly thought of within the legal profession. They know what it takes to successfully defend allegations of business crime and achieve the best possible outcomes for clients”


Of course, there are many factors that one ought to consider when defending such cases and a through knowledge of the financial markets is required by both lawyers and counsel. There are alternative outcomes which can be achieved to avoid the individual being dragged through the Court system.


Should you wish to discuss these matters further, or if you are concerned that you could face an enquiry or an investigation by the SFO or any other authority, then please contact our specialist team today.

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