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Banker accused of rigging markets boasted to traders: 'Libor is high because I have kept it high'

Tom Hayes told his peers that he had the power to keep crucial interest rate high, and involved brother-in-law in scheme, court told

A banker boasted that he had the power to manipulate financial markets by persuading traders, including his brother-in-law, to help rig interest rates, a court has heard.

Tom Hayes, 35, allegedly told peers that he had kept the London interbank offered rate, or Libor. “artificially high”, by “being mates” with staff at other banks.

Prosecutors said Mr Hayes, who is the first person to face trial over the global market rigging scandal. had led a “you scratch my back, I’ll scratch yours” scheme to make huge profits by manipulating rates.

The former trader worked for UBS and Citigroup in Tokyo between 2006 and 2010. He faces eight counts of conspiracy to defraud, which he denies, in a London trial that is expected to take at least two months.

On Wednesday, the second day of the trial at Southwark Crown Court. jurors heard how Mr Hayes allegedly involved traders at Royal Bank of Scotland and JPMorgan, as well as his brother-in-law, a HSBC trader named Peter O’Leary, in his scheme.

Libor - an interest rate benchmark designed to reflect bank borrowing costs - influences trillions of pounds worth of financial products. It is set by collating submissions from 16 banks on a daily basis.

Mr Hayes, who traded complex financial derivatives based on yen Libor, is accused of being a “ringmaster” of a group of traders to manipulate how the submissions were set by banks’ cash desks, making hundreds of millions of pounds for his banks in the process.

In a discussion with Will Hall, an RBS trader,

about why Libor was unusually high, Mr Hayes told him: “Libor is too high because I have kept it artificially high.”

When Mr Hall asked how, Mr Hayes said: "Being mates with the cash desks.” He highlighted a relationship with another banker at JPMorgan Chase, saying: "Chase and I always help each other out.”

Jurors also heard that Mr Hayes urged Mr O’Leary, his brother in law, to ask a HSBC colleague to alter his submissions.

A recording of a phone call, played in court, revealed that Mr Hayes told Mr O’Leary: “If you get to know him, it’d be a massive help for me. I’ve got $1m of [trade risk]. If he sets his Libor lower its worth $125,000 per basis point.”

He later backtracked on involving his family, allegedly saying: "I don’t want to put you in that position, it’s wrong of me to ask him a favour. I’m not going to bother you, pestering you about that."

Prosecutors also detailed a series of electronic chats, between Joachim Ruh, who made Libor submissions at UBS, and Mr Hayes.

After urging Mr Ruh to keep Libor submissions high while it would be profitable, Mr Hayes allegedly then told Mr Ruh that he could lay off, once it was no longer profitable.

“I won’t push it anymore,” Mr Ruh said.

Mr Hayes replied: “May as well ease off unless you have a fix :)”

Mukul Chawla, QC, prosecuting, said: “This isn’t anything to do with what Libor was meant to be. Libor is supposed to be about borrowing, what’s that got to do with this at all?

“It’s very much 'you scratch my back I’ll scratch yours’.”

Category: Forex

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