The Barclays Saga and Libor

A week before I did a story on the manipulation of the London Interbank Offered Rate   “LIBOR Manipulation : ny thing for you Big Boyz ”

As the blood flows from the proverbial carcass of Former Barclays chief executive Bob Diamond and political pressure claims the scalp of COO Jerry del Miser, the key focus up to what extent Barclays is culpable for the Libor saga and just how much markets should fear litigation and rolling heads at other head institutions.

I have tried to put in the understanding and the importance of LIBOR.

LIBOR has been called “the highway of finance” because it serves as the universal interbank benchmark interest rate used to price cash instruments in the real economy (deposits and loans) and short and long-dated derivatives, which serve as the critical reference for the cost of credit in the capital markets and the cost of hedging (and speculating) in equities, commodities, and foreign exchange. The intentional and systematic manipulation of LIBOR by not just one bank, but by a consortium of banks as is alleged, represents a brazen act of fraud and theft. The abstract nature of the fraud, in this case through manipulating rates affecting millions of transactions the perpetrators will never know or see, reveals both the cynicism and psychopathology of those committing the fraud.

The key charges against Barclays :

1) Submission to the libor and Euribor panels were influenced by requests from Barclays interest rate derivative trader between January 2005 and July 2008.

2) Barclays sought to influence other banks Euribor submissions as charged by the US Commodity Futures Trading Commission (CFTC)

3) The bank reduced Libor submissions during the crisis, and was guilty of operation failure between January 2005 and June 2010 according to UK’s Financial services Authority (FSA)

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