Société Générale (SocGen) has agreed to pay $475 million to settle US regulators’ allegations that it tried to manipulate key benchmark interest rates. The French bank reached the agreement with the Commodity Futures Trading Commission (CFTC) without admitting or denying wrongdoing.

Traders joked about jail

The CFTC alleges in a regulatory order that from 2006 through mid-2012 SocGen traders and management attempted to manipulate, and made false, misleading or knowingly inaccurate reports of market information in connection with the London interbank offered rate (Libor) for the US dollar, the yen and the euro and the euro interbank offered rate (Euribor). The agency described the alleged actions undermining ‘the integrity of these critical, global benchmark interest rates and the integrity of the US and global financial markets.’ A lack of internal controls, procedures and policies at the bank concerning its Libor and Euribor submission processes and its failure to adequately supervise its money market and derivatives trading desks and traders allowed the alleged misconduct to occur, according to the regulator. At times, employees at the firm ‘joked about going to jail because of the bank’s specious Libor submissions,’ the CFTC says.

Settlement reached

As part of the settlement, the bank agrees to undertake an extensive list of actions to ensure the integrity and reliability of its benchmark interest rate submissions and to implement effective methodologies and processes of setting benchmark interest rates. Among other things, it commits to implementing internal controls and procedures to prevent improper communications with submitters and supervisors regarding submissions, having monitoring systems or electronic exception-reporting systems that identify possible improper or unsubstantiated submissions, and, conduct internal audits of reasonable, random samples of its submissions. The bank has also entered into a three-year deferred prosecution agreement with the US Department of Justice (DoJ) that includes related allegations. SocGen CEO Frédéric Oudéa expressed regret over past misconducts, and affirmed extensive steps had been taken to strengthen their global compliance and control framework.