- Three eminent bankers who founded Euribor side with Hayes
- The UK court had a “deep misunderstanding” about their intentions and the rules they had set
- Declaration for merchants “whose lives have been ruined by erroneous convictions”
Fight: Tom Hayes maintains he is not guilty
Prisons are full of innocent people, as the saying goes.
Many observers will have no sympathy for Tom Hayes, the former bank trader who was sentenced to 14 years – of which he served four and a half – for manipulating Libor interest rates.
Unlike the subpostmasters, who were very ordinary people who led monotonous lives, Hayes was a high-octane billionaire dealer in Tokyo with five Mercedes cars.
In 2015, when he was sentenced, one of the harshest punishments ever committed for a white-collar crime, the financial crisis was still an open wound and anti-trade sentiment was in full swing.
But he was not judged for having an extravagant lifestyle. After recanting an initial confession that he claims was made under threat of a 200-year prison sentence in the United States, Hayes has maintained that he is not guilty.
He and another trader, Carlo Palombo, failed in an appeal last month. Tomorrow is the deadline for the two to apply for permission from the Court of Appeal to take their fight to clear their names to the Supreme Court. Hayes and Palumbo were jailed for manipulating Libor and Euribor, respectively. These were benchmarks for the rates used to price trillions of pounds of loans and financial instruments.
They were set through a process in which a group of banks submitted the rate at which they would lend to each other. During the financial crisis, this dark corner of the banking world hit the headlines. It goes far beyond the behavior of individual traders.
There were accusations that Bank of England officials had pressured commercial banks to lower Libor rates. Investigations were launched on both sides of the Atlantic to determine whether commercial banks had manipulated Euribor and Libor. The scandal claimed the lives of some high-profile scalps.
Barclays was fined £290m in 2012 for attempted rate manipulation. Then-president Marcus Agius honorably resigned and former CEO Bob Diamond was not far behind.
Paul Tucker, then a Bank of England MP, had a controversial conversation with Diamond over the submissions and failed to achieve his ambition of becoming governor.
But no senior British banker had gone to jail and there seemed to be a culture of impunity at the top banking level. Hayes believes he was made a scapegoat.
The case centered on this question: is it against the rules for traders to submit Libor or Euribor submissions in the commercial interests of their bank? Or should they have always presented the lowest rate? The appeal court judges ruled in favor of the latter.
But, in an extraordinary intervention this weekend, three eminent bankers who founded Euribor sided with Hayes and Palombo. They issued a fiery statement, saying the UK court had a “deep misunderstanding” of their intentions and the rules they had set out.
The statement, they said, was made in the hope of bringing justice to merchants “whose lives have been ruined by mistaken convictions.” Traders had acted “exactly as we, the founders of Euribor, expected them to do.”
Discretion is a way of life – close to an art form – for eminent bankers like Nikolaus Boemke, Helmut Konrad and Jean-Pierre Ravise, so such open words should carry weight. However, his statement will not be the basis of an appeal: the evidence is “a question of law of general public importance.”
It is far from a given that the Court of Appeal will grant permission. But whatever feelings one has about bankers, this is a case that causes deep concern.