Lloyds Bank Fined 218 Million

Lloyds Bank Fined 218 Million.

Lloyds Banking Group has been fined £218m for interest rate manipulation back in 2006 and 2009.

UK and US financial regulators imposed the fines following manipulation of interest rates and therefore fees payable to the Bank of England during the financial crisis.

Interest is payable when banks lend to each other using the London Inter-Bank Offered Rate (LIBOR) and funding scheme set up by the government called the Special Liquidity Scheme (SLS) as well as the Repo Rate (the British Bankers Association Repayment Rate).

The fines of £218,000,000 come from:

• Libor Failings:  £35m to the UK’s Financial Conduct Authority
• Libor Failings: £62m to the USA’s Commodity Futures Trading Commission
• Libor Failings £51m to the USA’s Department of Justice
• SLS Failings: £70m to the UK’s Financial Conduct Authority

The manipulation of interest rates effectively adjusted down the fees payable to US and UK regulators.  Hence the fine.

Comment

As ever, fees levied on banking groups are a “drop in the ocean” compared to what banks make in profit on a daily basis.  For example, if a bank is fined £100m yet its profits for the year are £5bn.  On a 240 working days year, 8 hour day, this means a bank would make in profit £2.60m per hour.  A fine of £100m is just 38 hours profit – less than a week.  If a bank is making £10bn a year, which many of the larger ones are, this is then around 2 days profit lost.

Fines are simply not big enough to deter poor practice.