Barclays Rate Fixing Scandal - Barclays manipulated Libor, the London inter-bank lending rate, considered to be one of the most crucial interest rates in finance.
On 27 June Barclays admitted to misconduct.
The UK’s FSA imposed a £59.5m penalty. The US Department of Justice and the Commodity Futures Trading Commission (CFTC) imposed fines worth £102m and £128m respectively, forcing Barclays to pay a total of around £290m.
One day later, Barclays’ share price plunged 15%.
Chief executive Bob Diamond said he would attend a Commons Treasury Committee and that the bank would cooperate with authorities. In a letterto the committee chairman Andrew Tyrie, he wrote: “Even taking account of the abnormal market conditions at the height of the financial crisis, and that the motivation was to protect the bank, not to influence the ultimate rate, I accept that the decision to lower submissions was wrong.” However, he said he would not resign.
On 29 June Prime Minister David Cameron urged regulators to use “all the powers at their disposal” to pursue Barclays. “This is a scandal. It is extremely serious. They’ve had a very large fine and quite rightly. But frankly the Barclays management team have some big questions to answer,” he said.
The same day, Bank of England Governor Sir Mervyn King called for a “cultural change”, adding: “The future calculation of Libor on ‘my word is my Libor’ is now dead.” He said implementing the Vickers banking reforms was the most important first step, but ruled out a Leveson-style enquiry into the banks.
July
On 2 July:
- Barclays chairman Marcus Agius resigned and also tendered his resignation as chairman of the BBA and Mr Diamond said in a letter to staff that he would “get to the bottom” of what happened
- The Serious Fraud Office (SFO) considered whether to bring criminal charges against bankers who tried to manipulate the inter-bank lending rate.
- Prime Minister Cameron announced a parliamentary review of the banking sector, to be headed by the chairman of the Treasury Committee, Andrew Tyrie. The review should ensure that the UK had the “toughest and most transparent rules of any major financial sector”, Mr Cameron said.
On 3 July Barclays chief executive Bob Diamond resigned, saying that the external pressure on the bank risked “damaging the franchise”.
read more - Timeline: Barclays’ widening Libor-fixing scandal
Why is this a big deal?
Libor (and Euribor, which Barclays also tried to manipulate)is used to set interest rates for loans, mortgages and derivatives. It’s one of the underpinnings of the global financial market.
While these manipulations netted the bank an extra few tens of thousands of dollars, it at the same time drove the cost of borrowing up by billions for consumers and businesses world wide.
Four other large banks are also now being investigated, they are Citigroup, UBS of Switzerland, Royal Bank of Scotland and HSBC of Britain.
