November 13, 2015 / 8:11 PM / 4 years ago

Traders facing Euribor charge were part of ECB crisis group

LONDON (Reuters) - Three of the traders accused of manipulating euro money market Euribor rates by Britain’s Serious Fraud Office (SFO) on Friday were part of a group that helped the European Central Bank (ECB) shape its response to the financial crisis, ECB documents show.

The famous euro sign landmark is photographed outside the former headquarters of the European Central Bank (ECB) in Frankfurt, Germany, July 17, 2015. REUTERS/Kai Pfaffenbach

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.

The interbank lending market, which acts as the plumbing system for financial markets, had frozen up. Banks stopped lending to all but their most trusted peers, fearful that any others in troubled countries would go bankrupt.

“During the crisis they (the contact group) were always important,” said Francesco Papadia, head of market operations at the ECB during the financial and euro zone debt crises.

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

The message the contact group gave to the ECB was that the central bank needed to provide an unlimited source of euros so that they could shore up their finances and replace the cash panicked customers and investors were withdrawing.

Papadia and ECB then head Jean-Claude Trichet did just that.

The ECB said in a statement: “The ECB money market contact group is a forum to discuss trends in the euro area money market with the industry. Members are representatives of major market participants.”

“The ECB plays no role in the setting of the Euribor rate,” it added.

The documents on the ECB website show Bermingham was a member of the contact group in 2010 and 2011, while Gharagozlou was a member in 2010 and Vogt a member in 2011. There were 26 members in total in 2010, including three ECB representatives, and 25 members in 2011.

(www.ecb.europa.eu/paym/groups/pdf/mmcg/members_2010.pdf?ab9d587b89c212de9fe8556c74cc72d7

www.ecb.europa.eu/paym/groups/pdf/mmcg/members_2011.pdf?ab9d587b89c212de9fe8556c74cc72d7)

Euribor is the euro-denominated equivalent of the London-based Libor rate, the manipulation of which has cost a string of banks hundreds of billions in fines and seen one UK trader sentenced to 14 years in prison following an SFO conviction in August.

Like Libor, Euribor is a benchmark for setting interest rates on trillions of euros of debt, including mortgages in a number of euro zone countries as well as credit cards and student loans.

Additional reporting by Francesco Canepa in Frankfurt; Editing by Mark Potter and Alexander Smith

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