ECB Had 3 Accused Rate Manipulators In Crisis Focus Group

Earlier this month in “Secret ‘Diaries’ Show ECB Board Members Met With Banks, Hedge Funds ‘Days’ Before Policy Meetings,” we brought you just the latest example of nefarious intermingling between central planners and a select group of private sector operators who essentially bet on policy. 

As it turns out, top ECB officials met personally with “banks and asset managers” just “days” and sometimes “hours” before policy meetings. This rather disconcerting revelation came courtesy of ECB officials’ “diaries” and although you would have to be completely devoid of a healthy sense of skepticism and/or entirely naive to believe that no nonpublic information was passed at those meetings, that’s what Mario Draghi wants you to believe. Here’s an ECB spokesperson: “The same underlying principles — guarding against signalling future monetary policy — are of course applied to bilateral meetings. In any case, no market-sensitive information is disclosed by the ECB in any non-public forum.” 

Right. “the same underlying principles” that led Benoit Coeure to tip off a non-public audience of hedge funds in London about PSPP frontloading.

And then of course there was the story of Martin Mallett, the BOE’s chief currency trader who was let go last year after 30 years with the bank after it became apparent that he might have known traders were rigging FX markets for years before the scandal became public but nevertheless failed to escalate the issue. 

Well now, we find out that the ECB - the same ECB where policymakers like to meet with banks and asset managers before major policy meetings, actually had three of the traders accused of gaming Euribor by Britain's Serious Fraud Office on Friday in a group that helped the the bank craft its response to the financial crisis! From Reuters:

The documents on the ECB website show that former Barclays euro money market desk head Colin Bermingham and Joerg Vogt and Ardalan Gharagozlou from Deutsche Bank - three of 10 people charged by the SFO on Friday - were part of the central bank's Money Market Contact Group at the height of the crisis.

 

The group regularly met and held conference calls as the central bank scrambled to stabilise markets that were threatening to push debt-strained Greece, Portugal, Ireland and even Italy and Spain out of the euro in 2010 and 2011.

Amusingly, the 10 people charged include Deutsche Bank’s Christian Bittar who can’t seem to get away from his title as rate rigger par excellence (although that’s not the term Anshu Jain used, that’s the spirit of a conversation the ex-Deutsche CEO once had about Bittar with a colleague back in the good ol’ days). Here’s Bloomberg:

U.K. prosecutors charged 10 former Deutsche Bank AG and Barclays Plc employees with manipulating a benchmark interest rate, including high-profile trader Christian Bittar, with an 11th facing indictment as soon as next week.

 

Six traders from Deutsche Bank employees and four from Barclays were charged with conspiracy to manipulate the Euribor benchmark, the Serious Fraud Office said in a statement Friday. Another trader listed anonymously in court documents may also be charged, according to three people familiar with the case.

 

Alongside Bittar, those linked to Deutsche Bank are Andreas Hauschild, Joerg Vogt, Ardalan Gharagozlou,  Achim Kraemer and Kai-Uwe Kappauf. Former Barclays employees Colin Bermingham, Carlo Palombo, Philippe Moryoussef and Sisse Bohart also face charges.

Ok, so the ECB was regularly communicating with three traders who are now charged with manipulating Euribor. Here's what Francesco Papadia, head of market operations at the ECB during the financial and euro zone debt crises has to say about the group: 

"They helped understand what was going on beyond what you see on the screens."

If you follow financial markets and that doesn't strike you as hilarious, then check your pulse. That is, we bet they did "help the ECB what was going on behind the screen", after all, they were the ones colluding to fix the market! 

In any case, we'll have to see what the time frames were here and if there was any overlap between when the allegations stem from and when this ECB committee operated (it's probably a better bet that the manipulation took place before the euro debt crisis), but in any case, we'll close with the following amusing quote for now: 

"The ECB plays no role in the setting of the Euribor rate," the ECB said in a statement.

Are you guys sure about that?...