LIBOR, the London Interbank Offered Rate, is considered to be one of the most crucial interest rates in finance, underpinning trillions of pounds’ worth of loans and financial contracts.
So when Barclays was fined $450 million last week after some of its derivatives traders were found to have attempted to rig this key rate, public confidence in banks was shattered. The scandal has forced Barclays chairman Marcus Agius, and CEO Bob Diamond, to resign.
“I wish I could say that this was an isolated case… You will hear more on this in due course,” the FSA’s acting director of enforcement, Tracey McDermott, said on Monday July 2.
According to a source interviewed by The Telegraph, “everyone knew” and “everyone was doing it.” There was no implication of illegality. There were 20 to 30 people in the room—from management to economists, structuring teams to salespeople—and more on the teleconference dial-in from across the country.
The Telegraph article discusses ‘the dislocation of LIBOR from itself’—banks could not be seen borrowing at higher rates for fear of liquidity repercussions, so traders put in low LIBOR submissions—as widespread. According to the source, the British Bankers’ Association, which compiles LIBOR, did ask for rate submissions, but did no checking. There was a general acceptance that the price was lowered a few basis points each day.
This widespread action of dislocating LIBOR from itself has led to an independent inquiry into the $504-trillion market’s underlying integrity. LIBOR had dislocated with itself for a very good reason—to hide the true issues within the bank.
To read Tyler Durden article: On Lie-Borgate: “Everyone Knew, Everyone Was Doing It”
BullionBuzz provides investors with quick snapshot of must-read news pertaining to precious metals markets. Continue reading
BullionBuzz is a weekly eNewsletter that offers investors a quick snapshot of must-read news pertaining to the markets and precious metals. Continue reading
BullionBuzz is a weekly eNewsletter that offers investors a quick snapshot of must-read news pertaining to the markets and precious metals. This week: Euro: Current Course Is Leading to Disaster Continue reading