Libor Scandal Will Crawl On

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The Libor rate manipulation scandal that took out three of Barclays head executives is far from over.

The $450 million global settlement between Barclays Bank and the FSA, CFTC and the US Department of Justice has been widely reported.   And so has the executive shakeup that took out Barclays’ chairman Marcus Angius, CEO Bob Diamon and COO Jerry del Missier.

The probe into interest rate manipulation is ongoing and includes at least seven other banks, but at this point it is hard to tell which of the banks, if any, was the ringleader in this saga.

Those in the business who rely on Libor rates to determine pricing of a variety transactions know that floating interest rates are determined by a process that often relies on verbal quotes from traders at up 16 or so representative banks. These banks include key money center banks in the US, the EU and the UK.

The key floating rate is the London Interbank Offered Rate (Libor).   And Libor is the global benchmark for home mortgages, student loans and an array of other debt offerings that ultimately affects up to $800 trillion worth of financial instruments.

In the end, the Barclays settlement shows how the British banking giant and other involved banks manipulated Libor rate when they worked in conjunction to move these rates in directions that helped the banks benefit from trading positions.

So this scandal is far reaching and it’s a pretty safe bet that other global settlements are forthcoming.   And it’s highly likely that other head executives will soon be walking in the footsteps of the Barclays’ troika right off the plank.

Anna Timone (195 Posts)

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