(latest update: Wednesday 20 September)
This is a free interactive timeline for readers of 'Rigged' by Andy Verity.
It contains audio recordings that the authorities on both sides of the Atlantic didn’t want you, the public, to hear.
Also embedded are links to copies of emails, confidential documents and contemporaneous news articles that reveal a secret history spanning 16 years: an unsettling true story of a high-level cover-up on both sides of the Atlantic followed by a series of miscarriages of justice in the UK and US.
Much of this evidence has never been shown to Congress nor to the UK Parliament. Some of the most powerful evidence was never put before juries in nine criminal trials in New York and London.
To get to know this story for free, you can listen here to The Lowball Tapes, a BBC Radio 4 investigative podcast series broadcast in 2022 and shortlisted for three awards.
The book, which contains much exclusive information in addition to what is set out below, including the personal stories of traders wrongfully prosecuted for ‘manipulating’ interest rates, can be purchased here.
This is the latest of many updates to this timeline to be published in the coming weeks, eventually bringing it right up to the present day. I’m open to any comments on it from any source, either here on Substack or via direct message to my Twitter account. I’ll also update it if I learn something editorially relevant and new to me.
Click on the links and the embedded audio below to see and hear evidence of the cover-up, followed by what prosecuted traders and brokers say was a stitch-up.
Could that be true?
You be the judge:
1969
To set interest rates on large loans, Greek banker Minos Zombanakis invents a formula that reflects banks’ shifting cost of funds. The first is an $80m loan to the Shah of Iran.
1970s
The formula, now named ‘Libor’ (the London Interbank Offered Rate) is used with increasing frequency to set interest rates for large offshore loans in US dollars.
January 1986
In response to a Bank of England request, the British Bankers Association (BBA) launches the brand ‘BBA Libor’. It issues instructions to 16 banks to publish a daily estimate of what interest rate they would pay to borrow a large sum of cash from other banks.
1986 to 2012
Traders on the cash desks of 16 banks on the Libor ‘panel’ answer the Libor question each working day: at what interest rate could they borrow cash in reasonable size at 11am?
They select the rate they will publish from the narrow range of interest rates on offer in the market at which they could borrow cash (eg money brokers tell them there are offers at 3.43%, 3.45% and 3.44%; they publish any one of those three).
With nothing to choose between that range of accurate answers to the Libor question, traders on cash desks check each day with colleagues on derivatives desks (who trade financial instruments that go up or down in price linked to Libor) whether they would prefer Libor high or low. That way the rate they select will be in keeping with a key part of their jobs - to do everything with their bank’s commercial interests in mind.
Traders in derivatives linked to Libor routinely ask their cash desk colleagues to quote their banks’ Libor estimates ‘high’ or ‘low’ to suit their bank’s commercial interests (eg trading positions):
December 1998
Euribor, the Euro Interbank Offered Rate, is published for the first time. Its founders are Helmut Konrad, then president of ACI Germany, a financial markets organisation of foreign exchange and money market traders; Jean Pierre Ravise, president of ACI France; and Nikolaus Bömcke, then secretary general of the industry body the European Banking Federation, who drafts the code of conduct.
18 August 2005
The BBA’s John Ewan tells senior Bank of England officials of daily commercial influence on Libor. Libor is ‘some 3 to 4 basis points over the actual market rate as it’s in the interests of banks to have a higher Libor’. (No-one falls off their chair.)
17 July 2007
Bear Stearns discloses that two hedge funds investing in US subprime mortgages have lost nearly all of their value.
20 July 2007
US Federal Reserve chair Ben Bernanke tells Congress that the amount of money lost on US sub-prime mortgages that aren’t being repaid could be up to $100bn.
9 August 2007
BNP Paribas announces it is freezing three hedge funds that specialised in US mortgage debt, indicating it has no way of valuing its mortgage investments. Credit crunch begins.
August 2007 - October 2009
Banks continually post Libor rates much too low to reflect the real cost of borrowing cash: lowballing.
10 August 2007
The huge, unknown scale of US mortgage losses has made banks reluctant to lend money to other banks for fear they might not get it back. Clive Jones of Lloyds tells BBA’s John Ewan no Libor is based on the definition as there are no cash offers in the market. Has the Bank of England spoken to the BBA about it?
Ewan consults other practitioners on the body that runs Libor, the Foreign Exchange and Money Markets Committee and comes back to Jones. Jones tells Ewan that Lloyds’s Libor isn’t real.
14 August 2007
German bank Landesbank Hessen-Thuringen Girosentrale tells the Bank of England Libors are ‘totally distorted, 25-30 bps away from where they should be’.
BoE’s Paul Tucker calls senior bankers from RBS, Barclays, HSBC, Lloyds and HBOS to a confidential meeting. They agree Libor fixings are too low and there’s a case for raising them considerably higher. In the next two days, banks hike rates by 20-25 basis points.
16 August 2007
The committee than runs Libor, the Foreign Exchange and Money Markets Committee discusses how banks can’t set Libor properly because there are no offers to lend cash.
20 August 2007
German bank Landesbank Baden-Wurttemberg tells the Bank of England it believes banks are manipulating Libor.
Barclays head of European Collateralised Debt Obligations (investments linked to US subprime mortgages) Ed Cahill resigns.
22 August 2007
Deutsche Bank warns the Bank of England that other banks are setting Libor ‘artificially low to allay market concerns’ – a practice later called ‘lowballing’.
Standard & Poor’s slashes credit ratings for two ‘structured investment vehicles’ exposed to US mortgages created by Barclays and places a third on review.
28 August 2007
Returning from holiday, Peter Johnson notices US dollar Libors are too low and corrects his rate upwards. He sends an email, ‘Draw your own conclusions about why people are going for unrealistically low Libors’, forwarded the same day to the New York Fed. (In July 2012, the email is released after Barclays Legal has redacted it, removing Johnson’s name).
29-31 August 2007
Barclays bosses Jerry del Missier, Bob Diamond and John Varley discuss negative media speculation about Barclays’ financial state with Paul Tucker, who tells Diamond that Barclays is above the market on Libor. “AAAARRRRRGGGGHHH!!!’ says Diamond privately.
31 August 2007
Financial Times article ‘Anxious Market Catches Barclays Short of £1.6bn’.
1 September 2007
The last date of the indictment period covering the ‘conspiracy to defraud’ by Barclays traders as alleged at trial by the Serious Fraud Office (1 January 2005 -1 September 2007)
1 September 2007
In a Saturday phone call Tucker tells del Missier ‘you should get your Libor rates down’, according to sworn testimony to the US Department of Justice by del Missier.
3 September 2007
Bloomberg report ‘Barclays Takes a Money Market Beating’ suggests Barclays’ higher Libor rates may be further evidence that it’s in financial difficulty.
Peter Johnson (PJ) wants to raise his Libor submission to reflect the higher cost of borrowing but is instructed not to by head of group balance sheet Miles Storey, who’s received an instruction passed down by del Missier. PJ tells a colleague he’s under political pressure from senior managers to understate his Libor estimate.
13-14 September 2007
BBC’s Robert Peston reveals Northern Rock has asked for and been granted emergency liquidity assistance (cash) from the Bank of England, prompting a run on the bank.
20 September 2007
At a Barclays board meeting including then chief executive John Varley and his deputy Bob Diamond it’s agreed that finance director Chris Lucas will take the lead on Libor, with group treasurer Jonathan Stone as a conduit to Dearlove.
21 September 2007
PJ tells the Federal Reserve Bank of New York (‘the New York Fed’) about lowballing, as he tells his New York colleague Ryan Reich later that day:
September 2007 - October 2009
PJ protests other banks’ dishonestly low, inaccurate Libor submissions, trying to post higher, more honest rates. But Storey and Dearlove repeatedly pass down instructions from the board of Barclays not to stand out too far from ‘the pack’ of other banks’ published Libor estimates of the cost of borrowing, meaning he’s also lowballing.
21 November 2007
Barclays group treasurer Jonathan Stone and PJ’s immediate boss Mark Dearlove express relief that PJ’s Libor rates no longer stand out above other banks. Stone tells him he doesn’t want Barclays to have the highest submission – ‘you’ve heard Bob as well. We don’t want to be in the press. It just ain’t worth it.’
29 November 2007
PJ’s boss Mark Dearlove calls Jonathan Stone to an emergency conference call (you can listen in below) with head of balance sheet management Miles Storey, PJ and Colin Bermingham. Fearing a ‘shitstorm’ if PJ posts what he thinks is a fair Libor rate – 5.50% - Dearlove, Stone and Storey instruct PJ to lowball – putting in his Libor estimate for the cost of borrowing dollars over 1 month at 5.30%, twenty basis points below where he thinks it should be. Dearlove tells Stone they need to get a wider audience involved and take the issue ‘upstairs’. (Dearlove, Storey and Stone - who were merely carrying out the directions of the board - have been offered the chance to comment but have not responded; Barclays declined to comment on this evidence).
Soon after the call, Storey calls Ewan to try to get the BBA to do something about lowballing, saying, ‘manipulation, for whatever reason, is going to come out.’ He also warns it would be wrong for banks to decide to raise rates together because' ‘that would be just as bad the other way round’.
Later, PJ fulminates to Barclays swaps trader Ryan Reich in New York. (Strong language alert - not for young ears):
30 November 2007
Miles Storey passes on Chris Lucas’s direction that Barclays should not be ‘outside the top end’ of other banks’ Libor submissions, meaning PJ will be posting false Libors.
4 December 07
PJ tells Dearlove that his Libor estimates are ‘a load of bollocks’ and he wants to take a stand. He writes an email for Dearlove to forward. ‘My worry is that we (both Barclays and the contributor bank panel) are being seen to be contributing patently false rates. We are therefore being dishonest by definition...Can we discuss urgently please?” He later says the same thing to Ryan Reich in New York.
5 December 07
Jon Stone says Lucas has told him he doesn’t ‘see the benefit’ of raising Barclays’ Libor submissions to a more accurate level. Dearlove speaks to Barclays compliance director Stephen Morse. ‘I don’t think it’s fair on PJ to be setting something which he knows is wrong’.
After Dearlove raises the issue with Diamond’s lieutenant Rich Ricci, Morse discusses lowballing with the UK watchdog the Financial Services Authority (FSA).
September 2007 - May 2009
The Bank of England, New York Fed, UK Treasury, Financial Services Authority and the British Bankers Association are told repeatedly by Barclays and others Libor is too low to reflect the real cost of borrowing cash and that banks are understating Libor rates to avoid speculation they are in financial trouble. Concerns communicated from commercial banks about lowballing, trader requests, manipulation. No moves to contact the police. The FSA is firmly against launching its own investigation.
16 March 2008
After running out of cash, Bear Steans is forced by a run on the bank to sell itself to JP Morgan Chase at a fire-sale price of $2 per share, with the Federal Reserve in support. Market in renewed turmoil.
9 April 2008
After complaints from banks not on the panel of Libor contributors, FSA Market Conditions Meeting discusses disconnect between US dollar Libor and cash rates. An FSA supervisor emails colleagues, ‘[the director of the banking sector - Tom Huertas] advised that the BBA will be coming in this afternoon and we will pass on our concerns that USD Libor may be subject to “manipulation”. Official sends note saying concerns have been recognised and escalated. However, an FSA internal audit team investigating this in 2013 (see p. 43, Communication 32 of this report) finds no record of this meeting.
Angela Knight sends memo, originally drafted by John Ewan, to board of BBA outlining lowballing and recommending that the BBA’s board members orchestrate ‘co-ordinated action’, directed ‘from the most senior level’ to raise dollar Libor so it more accurately reflects the interest rates at which cash is changing hands on the money markets.
10 April 08
Bank of England cuts interest rates. But press reports some lenders are raising them.
11 April 08
Colin Bermingham tells NY Fed’s Fabiola Ravazzolo that Barclays is not posting ‘an honest Libor’ in dollars, outlines how if you put your head above the parapet (posting higher, more accurate rates) you get bad press, so banks stay within the pack (lowballing). Fed reports it to US Treasury. A transcript of the call is released in July 2012 after Barclays Legal has redacted Bermingham’s name.
15 April 08
NY Fed speaks to BBA about lowballing. UK prime minister Gordon Brown urges banks to pass on rate cut. Media reports that ‘the price banks charge each other to lend money – known as Libor – remained stubbornly high’.
16 April 08
The Wall Street Journal publishes an exposé by Carrick Mollencamp, ‘Bankers Cast Doubt on Key Rate Amid Crisis’, alluding to banks ‘fibbing’ in their Libor rates.
BBA Board meets, chaired by HSBC global boss Stephen Green, and discusses Angela Knight’s memo. Ewan tells Miles Storey on the phone afterwards that all the board members agreed that lowballing is ‘best dealt with quietly’ and that board members should ‘have a word with the people who quote the rates’ to see if they can float the dollar Libor rate up. Storey asks Ewan what steps have been taken to avoid ‘collusion’ – ie an illegal price-fixing cartel. Ewan says they haven’t got that far. Storey suggests avoiding involving chairman and chief executives. Ewan reveals that’s who the board members are.
BBA announces that it is bringing forward its annual review of LIBOR fixings. Indicating it’s fully aware of lowballing, a Bank of England market conditions update reports: ‘the BBA asserted it could ban any member deliberately misquoting […] This was mainly thought to be aimed at European banks understating their US$ fixings, given they did not want to publicly acknowledge their higher bidding rates’.
Much more to come…..
Note: this is a work in progress to accompany publication of Rigged. It makes no claim to be comprehensive. If you spot any errors or significant omissions then please do get in touch, either via the contact form on this blog or by DM-ing me on my Twitter account https://twitter.com/andyverity
If you were instructed to lie by your boss on orders from the board of directors, what would you do? Peter Johnson did all he could to alert the authorities to what was going on. His thanks were to be prosecuted. But in 2007, it was him who was making a stink about 'an ethical and legal thing', indignant that 'I'm patently giving a false rate'.
This has now been updated with two more incendiary audio recordings - from 29 November 2007 and 30 November 2007. Not for delicate ears!