Former Merrill Lynch prop trader Alexis Stenfors, who was banned by the regulator for disguising trading losses at Merrill seven years ago but has since become an academic specialising in the Libor scandal, said: “In hindsight, it appears as if the FSA offered Barclays a settlement rather quickly.
"The regulators underestimated whom and what they were up against. Libor was self-regulated by the large global banks with a bank lobby at the helm. Could you imagine a more difficult opponent?”
Questions have also been raised over how the probe was conducted. According to a Freedom of Information request seen by the Standard, the FSA spent a mere £900,000 investigating Barclays.
The bank put about £100 million into its internal probe into the scandal, which helped inform the regulator’s investigation and was conducted by law firm Clifford Chance.
Questions have been asked about the probe’s independence. The City watchdog allows businesses to conduct their own investigation into misconduct, a practice it rigorously defends.
“We never “subcontract out” our investigative responsibilities to the firms themselves,” the FCA said.
“We always test the evidence ourselves, often investigating further in parallel or in follow-up. Crucially, we always reach our own conclusions on the evidence.”
The regulator said its investigations into individuals linked to Libor misconduct “remain ongoing”, without giving further details.
Barclays agreed an early settlement with the FSA, which knocked 30% off its fine, and praised the bank for “extremely good co-operation” in providing evidence.
But little is known about the depth of the probe, prompting questions about what evidence Barclays submitted to the watchdog.
These could be answered by a court case under way in the US that is seeking to force the bank to reveal what it submitted to regulators.
In March, three of the traders — Pabon, Reich and Merchant, all US citizens — made an application in a New York court to force Barclays into handing over non-public documents it had submitted to authorities, including the FCA.
The bank tried to block the request, saying it wasn’t relevant to the men’s case in the UK, but US district court judge Lewis Kaplan ruled against it in May, responding that it was “presumptuous for Barclays to insist that it, rather than the court, be the ultimate judge of what is relevant”.
Barclays must now hand over the documents, which could reveal what it told the regulator. It declined to comment on the case.
It is also unclear how far up the chain knowledge of Libor rigging went. A drip-feed of information in the civil and criminal courts implicating more senior figures in other Libor-related cases has raised eyebrows.
Tom Hayes, the former UBS and Citigroup trader currently serving 11 years in prison for Libor rigging, has regularly claimed his superiors knew what was happening.
The FSA found two shades of manipulation at Barclays. It said one, leading up the financial crisis was profit-motivated while the other, during the crisis, was linked to fears at senior levels about Barclays’ financial robustness.
In one instance linked to the latter type, current head of money markets Mark Dearlove — who is now based in Tokyo as the bank’s head of Asia-Pacific markets — was said to have accepted that “he was involved in and aware of manipulation of Libor”.
The claim was made in a court filing related to a civil case between Guardian Care Homes and Barclays by Judge Julian Flaux, who was hearing the case.
Dearlove, son of former MI6 head Sir Richard Dearlove, was said to have been investigated by the bank and given a written warning in 2012.
No charges have ever been brought. Barclays declined to comment while Dearlove did not respond to an email request for comment.
Two other current senior Barclays staff, head of non-core assets Harry Harrison and the investment bank’s chief operating officer Mike Bagguley, were also accused by Merchant in the recent trial of having knowledge of practices linked to Libor manipulation.
Both still work for the bank and appeared for the prosecution in the case. They deny the allegations.
The court also heard more details about an interview Merchant gave to the SFO, where he accused former head of global fixed income Eric Bommensath — another prosecution witness — of telling him over lunch about “practices” that amounted to Libor rigging. Bommensath, who has since left Barclays, also denies the claims.
Harrison, Bagguley and Bommensath have denied that Libor manipulation was an industry practice and also deny that the practice was condoned and approved. Barclays declined to comment further.
Part of the problem in bringing potential prosecution cases against more senior figures in financial crime cases generally is a lack of evidence precisely because of their seniority, according to lawyers.
Stenfors said: “You have to bear in mind that at the end of the day, it is a trading floor. It is very unusual for senior management to communicate via chatrooms with more junior personnel. Instructions were often given verbally, so there might not even be an email trail. It would be one word against another.”
Irwin Mitchell partner Sarah Wallace said: “That may be because senior officials simply were not involved nor were knowledgeable about the conduct or, if senior officials did know about and play a part in the conduct, there is no actual evidence of that — for example, the email chain goes cold.”
With more cases linked to Barclays’ Libor past coming before court, the issue still has further to run, but it is unlikely to change the course of the investigation.
“There’s no enthusiasm from the FCA to look at it again,” a person close to the case said. “It’s so depressing.”
