UBS Had Libor-Rigging Instruction Manual, Former Trader Claims

Signs are seen on the outside of Swiss bank UBS in central London

UBS Had Libor-Rigging Instruction Manual, Former Trader Claims (ZeroHedge, June 19, 2015):

Just like in the case of Goldman’s first of its kind MBS settlement which unleashed over $200 billion in legal charges against the US banking system (an IRR of about 1% relative to the criminal gains) and which in turn cast all the blame on the infamous Fabrice Tourre who was the solitary scapegoat for all of Goldman’s Abacus transgressions, so when it comes to Libor rigging at one of the biggest culprits, Swiss bank UBS, all the senior executives are trying to put all the blame on 35-year old Tom Hayes who is the centerpiece of the prosecution’s case against Libor manipulator.

The only problem: Hayes won’t go down without a fight and unlike Tourre who may well have been promised a Swiss bank account with many zeroes in it on the other side, Hayes is fighting back and making it very clear that it wasn’t just him who was rigging Libor. It was everyone. And everyone knew about it, from the traders on to the very top.

His proof: a Libor “manipulation” manual, presented as evidence in court.

According to Bloomberg, Hayes told prosecutors in 2013 that UBS Group AG distributed “an instruction manual on fixing Libor” to suit their trading positions. The Swiss bank’s e-mailed “Guide to Publishing Libor Rates,” which was shown to jurors by prosecutors in London Thursday, included an instruction for traders to adjust their submissions depending on their “delta/fixing position.”

“If 3m Libor” exposure “is 4,125 this means we are receiving” and “therefore we want to increase the fixing by 25 basis points,” according to the internal UBS guide. “If the number is negative then vice-versa.”

Hayes, the first person to stand trial for allegedly manipulating the London interbank offered rate, told prosecutors the document was evidence that Libor-rigging was standard operating procedure during his time at UBS.

The problem was exacerbated because the managers who oversaw Libor submissions also had large trading positions based on the benchmark, Hayes added.

“This is where what UBS is doing in terms of throwing individuals under the bus is really wrong,” Hayes told the Serious Fraud Office in 2013.

Hayes worked at UBS from 2006 to the end of 2009 before moving to Citigroup Inc. The 35-year-old is accused of eight counts of conspiracy to manipulate Libor, a benchmark for financial products worldwide.

Will Hayes’ quest to diffuse responsibility and bring down more senior executives with him succeed? Hardly. Case in point: the man who worked alongside Goldman’s Fab Tourre and directly supervised his work, just launched a hedge fund! Also from Bloomberg:

Egol, who wasn’t accused of any wrongdoing in the Abacus matter, testified at Tourre’s trial in 2013. Tourre was found liable for failing to disclose to investors in the security that hedge fund Paulson & Co. helped select the mortgage-backed assets underlying it. Egol, who earned an MBA in finance from the University of Chicago, worked at Goldman from 1998 until early last year.

Speaking of which, does Egol’s brand new hedge fund, Firebreak Capital, still accept capital? After all, if there is anyone who can make money in any market, it is the person who only bets on a “sure thing”, gets caught, gets away with it, and a few years later, gets another change to bet only on “sure things”…

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