NRI banker is found culpable of rigging interest rates in UK. Three men are to be sentenced for rigging global benchmark interest rates aka Libor, (London interbank offered rate), between 2005-07. Jay Merchant, 45, is one among the former Barclay’s bankers. Serious Fraud Office (SFO) has alleged that Jay Merchant, Alex Pabon and Ryan Reich, conspired together and with others to defraud Barclays and its entities.
The prosecution claimed that Merchant was one of the traders who asked Libor rate submitters to put in rates that suited their trading at the daily setting of the Libor (London Interbank Offered Rate).
The accused were charged of dishonestly skewing Libor to defraud others and make more money for themselves and Barclays. Barclays had to pay 290 million pounds in fines for the fraud. Importantly, since past few years, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the rate submissions, leading to such scandals.
As per the judgment, these men had misused their position and trust. These men will serve half of their sentence in custody and will be released to serve the remaining half on license.
Libor, the London inter-bank lending rate, is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest. Banks submit their daily estimates of borrowing rates, i.e. the actual interest rates they are paying, or would expect to pay, for borrowing from other banks to the British Bankers Association that used them to calculate Libor, including that of Barclay’s bank. The minor changes in the rate had the potential to generate large profits for a trader.