Lawsuit Says Brevan Sought To Manipulate Libor

Mar 30 2012 | 1:39pm ET

Brevan Howard Asset Management sought to influence a key benchmark interest rate, a fired bank trader has alleged.

The hedge fund, one of Europe's largest, asked the Royal Bank of Scotland to change the London interbank offered rate in August 2007, Tan Chi Min said in a court filing. Tan is suing RBS for wrongful dismissal.

Brevan is not accused of any wrongdoing in Tan's suit. But the former head of short-term interest-rate trading for the Japanese yen in Singapore cited the hedge fund's request to back up his claim that it was "common practice" for the bank's traders to make Libor requests.

In December, Tan said that RBS routinely "took requests from clients… in relation to the fixing of Libor." In papers filed last week with the Singapore High Court, Tan elaborated, writing that "Brevan Howard telephoned on 20 Aug. 2007 to ask the defendant to change the Libor rate," and that RBS "received this request without objection." Tan added that head of short-term markets finance Scott Nygard was aware of Brevan's request.

Libor, which serves as the benchmark for some $360 trillion in securities, is a daily average calculated by the British Bankers' Association, which asks RBS and other lenders for borrowing costs ranging from overnight to one year. A predetermined number of outliers are eliminated before the average is calculated, making it difficult for just one bank to manipulate the rate.

Securities regulators in the U.S. and U.K. are currently investigating whether banks are conspiring to manipulate Libor. Last April, Austrian hedge fund FTC Capital sued 12 banks, including RBS, for allegedly doing so.

What's more, in February, a Brevan employee, Christopher Cecere, denied that he sought to manipulate a key Japanese interest rate while working at Citigroup.

Tan is seeking $1.5 million in bonuses and 3.3 million RBS shares. RBS said that Tan was fired because he sought to improperly influence its rate-setters from 2007 through last year.

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