%VIRTUAL-SkimlinksPromo%A former Credit Suisse trader who saw the Bank of England's quantitative easing programme (QE) as "cake" to profit from has been fined nearly £700,000 by the City regulator after rigging the price of UK bonds.
Mark Stevenson was also banned from the industry by the Financial Conduct Authority (FCA) after his attempt to exploit QE - a £375 billion programme intended to help nurse the economy back to health.
The FCA found that he artificially ramped up the price of a £1.2 billion holding in a set of "gilts" - parcels of Government debt - hours before he intended to sell them to the Bank.
But his unusual trading was reported within 40 minutes and officials at Threadneedle Street decided not to buy the gilt, which it had been due to buy as part of QE.
The FCA found the trading had the potential to impact on taxpayers, since if the Bank had overpaid for the bond its losses would be shouldered by the Treasury.
Details of the episode in October 2011 surfaced publicly last summer when the Bank's executive director for markets, Paul Fisher, told MPs that claims about the "thoroughly reprehensible" allegations had been referred to the regulator.
Today the FCA announced that Mr Stevenson, who left Credit Suisse last December, had been fined £662,700 after qualifying for a 30% discount from a potential £946,800 fine because he agreed to settle at an early stage.
It is the first enforcement action for manipulation of the gilt market, and comes in the wake of a series of market rigging scandals.
Banks have been fined billions for manipulation of the Libor interbank lending rate and world regulators are investigating allegations of foreign exchange rate rigging that threaten to become at least as serious.
Tracey McDermott, director of enforcement, said: "Stevenson's abuse took advantage of a policy designed to boost the economy with no regard for the potential consequences for other market
participants and, ultimately, for UK taxpayers.
"He has paid a heavy price for his actions.
"Fair dealing is at the heart of market integrity. This case sends a clear message about how seriously the FCA views attempts to manipulate the market."
The FCA described the actions of Mr Stevenson, a bond trader with nearly 30 years' experience, as "particularly egregious".
It added that the episode was the action of one trader on one day, and there was no evidence of collusion with other banks.
The FCA's findings described how the Bank of England had announced its latest tranche of bond buying as part of QE would take place on October 10, 2011.
Between 9am and 2.30pm on that day, Mr Stevenson "significantly increased" his holding in the relevant gilt, accounting for 92% of its turnover that day.
"Given his significant market experience he was fully aware of the impact this would have - and traded with the express intention of increasing the gilt's price."
But by 9.39am others in the market had notified the Bank of this unusual activity, saying the bond had been "squeezed" and "rammed".
One trader noted that it appeared to be a deliberate attempt to push the price higher in order to sell later in the day.
The gilt's performance significantly outperformed others in the market on the day but fell back after the Bank took the "unprecedented step" of announcing it would not be buying it.
Had it gone ahead with the trade, Mr Stevenson would have accounted for 70% of the £1.7 billion allocated to QE that day, the FCA found.
The findings also revealed details of a telephone conversation between Mr Stevenson and a broker days earlier, in which he said "we've been loading up with QE trades for months" and "QEs are...
The FCA concluded that he "was indicating his belief that QE was an opportunity to profit from selling gilts to the BoE [Bank of England]".
It added: "Mr Stevenson has stated that he bought the bond because he believed it was cheap and not with the definite intention of offering to sell it to the BoE later that day."
But the FCA concluded his trading was designed to move the price of the bond.
It also found Credit Suisse "stood to make significant sums of money" had the bond offer been
accepted by the Bank and Mr Stevenson would have "indirectly benefited".
Mr Stevenson was a director on the company's London bond trading desk, who was "able to trade with a large degree of autonomy".
The FCA said neither the firm nor any of its other employees were subject to criticism from the ruling.
Credit Suisse said: "We agree with the FCA's decision to sanction Mr Stevenson and are pleased to note that neither Credit Suisse nor any other employed individuals have been found at fault.
"The bank co-operated fully with the investigations into this matter by the Bank of England and Financial Conduct Authority."
10 things your bank doesn't want you to know
Bond-rigging trader fined £662k
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution.
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself.
Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.
Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.
Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.
As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.
If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.
If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.
If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.
The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.
If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.
If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.