Caroline Binham, Financial Regulation Correspondent
A UBS banker at the heart of the Libor-rigging scandal will have no enforcement action taken against him, after the UK financial watchdog failed to persuade its own legal panel of experts of its case.
Panagiotis Koutsogiannis, who was known as “Pete the Greek” by UBS traders — including Tom Hayes, who was found guilty of Libor manipulation this week — was suspected by the Financial Conduct Authority of dishonesty and could have faced a ban from the City if any wrongdoing were proved.
But, in a significant blow to the regulator, the regulatory decisions committee (RDC) that vets its enforcement cases before any action is made public has ruled that the FCA had not proven its case against Mr Koutsogiannis.
“After a lengthy and full investigation we are very pleased that our client has been exonerated and that the FCA found that he was neither dishonest nor lacking in integrity,” said Ben Rose, Mr Koutsogiannis’s lawyer at Hickman & Rose.
Mr Koutsogiannis is the former head of funding for UBS’s rates division, who earned the nickname “Pete the Greek” because Mr Hayes and other traders could not pronounce his name. Mr Hayes, a former yen derivatives trader at both UBS and Citigroup, is the first person in the world to be found guilty by a jury of charges related to manipulation of the London interbank offered rate, or Libor.
In Mr Hayes’ trial at London’s Southwark Crown Court, the jury heard that Mr Koutsogiannis and other UBS colleagues discussed Libor fixing in several chats.
In a chat from April 2008, Mr Koutsogiannis requested “low fixing pls.” Then in June 2009, he wrote to another colleague: “JUST BE CAREFUL DUDE.” The colleague responded: “i agree we shouldn’t be talking about putting fixings for our positions in public chat.”
Mr Koutsogiannis, who is based outside of the UK, refused to give evidence during the trial, the court heard. The jury was instead shown transcripts of interviews he had given to the financial regulator and its US equivalent, the Commodity Futures Trading Commission.
Despite $9bn-worth of fines for banks over Libor allegations, there have been few related cases brought against individuals by the FCA to date. Some are postponed pending the conclusion of parallel criminal investigations. Tough new rules designed to improve accountability come into force next year, meanwhile, and the FCA has proposed extending them to wholesale markets too.
The FCA declined to comment on Mr Koutsogiannis’s case.
However, it is the second setback for the watchdog at the hands of the RDC this summer, after Bruno Iksil, the so-called London Whale — a trader at the centre of huge losses at JPMorgan Chase in 2012 — was also notified by the FCA that no action would be taken against him following an RDC decision.
This led some legal experts to question the way in which big investigations are conducted by the watchdog. Its probes have typically resulted in speedy settlement by the institutions involved after they hand over the results of internal investigations to the watchdog — even if they must pay nine-figure fines — while individuals fight any allegations of wrongdoing.
“Adverse RDC decisions are what happens when the FCA relies on investigations conducted by the bank’s own lawyers,” said Sara George, a regulatory partner at Stephenson Harwood, the law firm. “In no other area of criminality would the suspect be allowed to investigate itself — it is the equivalent of allowing the burglar to dust for fingerprints.”