Brevan Howard asked RBS to change Libor

Written by Bloomberg | Updated: Mar 31 2012, 07:38am hrs
Brevan Howard Asset Management, a $33-billion hedge fund, asked Royal Bank of Scotland to change the London interbank offered rate five years ago, according to a trader suing the lender for wrongful dismissal.

Brevan Howard telephoned on 20 August 2007 to ask the defendant to change the Libor rate, Tan Chi Min, a trader fired by the bank for allegedly trying to manipulate the rate, said in court papers filed March 23 with the Singapore high court. The bank received this request without objection, according to the document. The hedge fund isnt a party in the suit and isnt being sued for wrongdoing.

Scott Nygaard, listed as head of short-term markets finance on an RBS website, knew about the call from Brevan Howard, Tan said in his filing. No further facts or particulars supporting Tans allegation were given in the court papers.

Regulators around the globe are probing whether banks colluded to manipulate rates including Libor, the basis for $360 trillion of securities worldwide. RBS has substantial and credible defenses to claims it tried to rig interest rates, the Edinburgh-based bank said in its annual report March 9.

Suresh Nair, an attorney at Straits Law Practice in Singapore who represents Tan, declined to elaborate further on the fired traders claims about Brevan Howard. Nygaard, who remains an RBS employee, declined to comment. Patricia Choo, RBS spokeswoman, as well as officials at London- based Brevan Howard declined to comment on the case.

Libor is derived from a survey of banks conducted each day on behalf of the British Bankers Association in London. RBS and other lenders are asked how much it would cost them to borrow from each other for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs. After a predetermined number of quotes are excluded, those remaining are averaged and published for each currency by the BBA before noon.

Three-month dollar Libor rose to a six-and-a-half-year high of 5.73% on September 7, 2007 as concern that losses on securities linked to US subprime mortgages would escalate prompted lenders to hoard cash. The three-month dollar Libor is currently at 0.47%. Because outlier rates are discarded, it would be difficult for a single bank to manipulate Libor to benefit its trading positions, said Christopher Rieger, head of interest-rate strategy at Commerzbank.