Changes to LIBOR: Discontinuation of Canadian Dollar LIBOR
The London Inter-bank lending rate (LIBOR) underwent a number of changes last year that have impacted certain existing financial transactions and will continue to shape future transactions in 2014.
LIBOR is the primary global benchmark, or reference rate, for short term interest rates in major currencies. It is intended to reflect the average rate at which banks can obtain funding in the London inter-bank market for a particular currency and particular time period or “tenor”. The British Bankers Association (BBA) has, since 1986, operated and administered a screen LIBOR rate (BBA LIBOR) calculated from a panel of banks’ submission of the rates at which they can borrow funds.
Over the past few years, the operation of BBA LIBOR has increasingly been a matter of concern among regulators, participants and LIBOR users. The rate submissions that form the basis of BBA LIBOR are estimates of borrowing costs and not actual transactions. As a result, concerns have been raised regarding whether LIBOR is an accurate and reliable benchmark. Additionally, regulatory investigations by UK and overseas authorities have found that attempts have been made to manipulate LIBOR and other benchmarks.
To address these concerns, a review of LIBOR was undertaken by Martin Wheatley, the Chief Executive of theFinancial Conduct Authority (FCA) on behalf of the UK Government. This review, known as the “Wheatley Review”, resulted in the UK government’s implementation of a number of changes to LIBOR including the following:
1) Transfer of Administration of LIBOR to NYSE Euronext
In July 2013 it was announced that NYSE Euronext Rate Administration Ltd., a new subsidiary of NYSE Euronext, will take over the administration of LIBOR from the BBA. It is expected that the transfer of responsibilities will be completed by early 2014.
Wells Fargo Creates Swat Team to Keep Loans Inhouse: Mortgages
Wells Fargo & Co. (WFC), the largest U.S. home lender, has assigned about 400 underwriters to originate mortgages for the bank to hold, with as many as 40 percent of the loans likely to fall outside government guidelines taking effect this week.
The bank is training the group as a way to increase lending without losing control of quality, according to Brad Blackwell, head of portfolio lending for the San Francisco-based lender. The group will review loans including those with terms that prevent them from qualifying for protections provided by the Consumer Financial Protection Bureau, or CFPB, under new rules, he said.
OCC ASSESSES A $350 MILLION CIVIL MONEY PENALTY AGAINST JPMORGAN CHASE FOR BANK SECRECY ACT VIOLATIONS
FOR IMMEDIATE RELEASE January 7, 2014 Contact: Bryan Hubbard (202) 649-6870 OCC Assesses a $350 Million Civil Money Penalty Against JPMorgan Chase for Bank Secrecy Act Violations WASHINGTON — The Office of the Comptroller of the Currency (OCC) today announced a $350 million civil money penalty against JPMorgan Chase, N.A.; JPMorgan Bank and Trust Company, N.A.; and Chase Bank USA, N.A., for Bank Secrecy Act (BSA) violations. The penalty follows a January 2013 cease and desist order in which the OCC directed the three affiliated banks to correct deficiencies in their compliance programs. The OCC found critical and widespread deficiencies in the banks’ BSA and anti-money laundering (AML) compliance programs with respect to suspicious activity reporting, monitoring of transactions for suspicious activity, the conduct of customer due diligence and risk assessments, and internal controls and independent testing. The penalty is based in part on JPMorgan Chase’s failure to report suspicions about Bernard L. Madoff Investment Securities, LLC, to U.S. law enforcement and regulators, despite having alerted United Kingdom authorities in the months prior to Mr. Madoff’s arrest. The banks also failed to detect and report other cases of suspicious activity. Since issuing the January 2013 cease and desist order, the OCC continues to monitor progress that JPMorgan Chase has made to correct weaknesses identified by the agency as well as their ongoing work and commitment to remedy the remaining deficiencies. We will continue our oversight efforts and take further action as warranted. Concurrent with the OCC’s enforcement action, JPMorgan Chase entered into a deferred prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York and agreed to forfeit $1.7 billion to the United States. Also concurrent with the OCC’s enforcement action, the Financial Crimes Enforcement Network assessed a $461 million civil money penalty that is deemed satisfied by the forfeiture to the U.S. government. Related Link Civil Money Penalty (PDF) # # #
UNITED STATES OF AMERICA
DEPARTMENT OF THE TREASURY
COMPTROLLER OF THE CURRENCY
In the Matter of: )
JPMorgan Chase Bank, N.A. )
Columbus, OH )
JPMorgan Bank and Trust Company, N.A. )
San Francisco, CA )
Chase Bank USA, N.A. )
Wilmington, DE )
CONSENT ORDER FOR THE ASSESSMENT OF A CIVIL MONEY PENALTY
The Comptroller of the Currency of the United States of America (“Comptroller”),
through his national bank examiners and other staff of the Office of the Comptroller of the
Currency (“OCC”), has conducted examinations of JPMorgan Chase Bank, N.A., Columbus,
Ohio; JPMorgan Bank and Trust Company, N.A., San Francisco, California; and Chase Bank
USA, N.A., Wilmington, Delaware (collectively referred to as “Bank”). The OCC has identified
deficiencies in the Bank’s Bank Secrecy Act/anti-money laundering (“BSA/AML”) compliance
program, resulting in violations of 31 U.S.C. § 5318(i) and its implementing regulation,
31 C.F.R. § 1010.610(a), (b) and (c); 12 U.S.C. § 1818(s) and its implementing regulation,
12 C.F.R. § 21.21(c); and 12 C.F.R. § 21.11(c) and (d). The Bank is also the subject of a prior
OCC Consent Cease and Desist Order issued on January 14, 2013 (“January 2013 Order”).
JPMORGAN CHASE AGREES TO PAY $1.7 BILLION TO SETTLE FEDERAL CLAIMS IN MADOFF FRAUD – SUPPORTING DOCUMENTS FOR DEFERRED PROSECUTION AGREEMENT W/ EXHIBITS: U.S. V. JPMORGAN CHASE BANK, N.A.
JPMorgan Chase & Co will pay $1.7 billion to settle U.S. charges it violated laws requiring banks to monitor customer activity for money laundering in its handling of accounts of convicted Ponzi-schemer Bernard Madoff. JPMorgan Chase Bank will be criminally charged with 2 violations of the Bank Secrecy Act in connection with the Bernard Madoff’s Multi-Billion Dolar ponzi scheme. Deferred prosecution agreement requires JPMC to admit its conduct, pay $1.7B to victims of Madoff’s fraud & reform its anti-money laundering policies
RBS Pays $600 Million for Manpulating Interest Rates … But Big Banks Are Manipulating EVERY Market to the Tune of Trillions of Dollars
Bloomberg reports today:
Royal Bank of Scotland Group Plc was ordered to pay $50 million by a federal judge in Connecticut over claims that it rigged the London interbank offered rate.
RBS Securities Japan Ltd. in April pleaded guilty to wire fraudas part of a settlement of more than $600 million with U.S and U.K. regulators over Libor manipulation, according to court filings. U.S. District Judge Michael P. Shea in New Haventoday sentenced the Tokyo-based unit of RBS, Britain’s biggest publicly owned lender, to pay the agreed-upon fine, according to a Justice Department Justice Department.
Global investigations into banks’ attempts to manipulate the benchmarks for profit have led to fines and settlements for lenders including RBS, Barclays Plc, UBS AG and Rabobank Groep.
RBS was among six companies fined a record 1.7 billion euros ($2.3 billion) by the European Union last month for rigging interest rates linked to Libor. The combined fines for manipulating yen Libor and Euribor, the benchmark money-market rate for the euro, are the largest-ever EU cartel penalties.
Global fines for rate-rigging have reached $6 billion since June 2012 as authorities around the world probe whether traders worked together to fix Libor, meant to reflect the interest rate at which banks lend to each other, to benefit their own trading positions.