For those of us sitting at home, watching our TV screens,
the unravelling of the LIBOR scandal may have seemed shocking and perhaps even
at times exciting. However, for the major players involved in the manipulation,
the week beginning the 27th of June brought a level of stress
unknown to them since the collapse of Lehman Brothers.
Barclays Bank has easily become the most prominent of the
deceivers. The publication of internal emails blatantly asking for the LIBOR to
be fixed at certain rates stunned the world. What I find most troublesome about
this was their clear lack of effort to conceal their manipulation. There is no
doubt that they felt that there would never be an investigation into their
activities.
Here are a few examples of the email content:
“We need
a really low 3m fix, it could potentially cost a fortune. Would really
appreciate any help."
"Your annoying colleague again ... Would love to get
a high one month. Also if poss a low three month ... if poss ... thanks."
The witty replies also
show the relaxed attitude to the fixing:
"Done
... for you big boy”
“Dude, I owe you big time! Come over one day after work
and I'm opening a bottle of Bollinger"
On the 27th of June 2012 the FSA published a
report stating that they had made a settlement with Barclays of £59.5 million. The
report found that Barclays had co-operated with its internal derivatives
traders in order to set the rate so that it would give them a benefit over
other market participants. The London Evening Standard reports that 257
requests were made by derivatives traders, an astonishing figure. The FSA also
found evidence that it dealt with various banks in an attempt to fix the rate.
The use of the LIBOR to portray good financial health
during the crisis period has shown to come from the direct influence of the
Bank of England. To speculate whether this would have occurred without the
intervention of the BoE is impossible, and perhaps unfair, to suggest. Paul
Tucker, directors of markets for the BoE at the time, instructed Barclays to
lower their LIBOR quotes in order to be more in line with other banks. Kregal,
2012, argues that this was a much needed step. In October 2008, when the call
was made, Barclays had not sought any financial assistance. Kregal claims that had
Barclays continued with the higher LIBOR rates that it could have resulted in
the markets fearing the future of Barclays.
The reaction of
top management in Barclays to the scandal was apparent shock. The CEO, Bob Diamond,
and the chairman, Marcus Agius, denied any involvement in the fixing blaming it
on a few rogue traders. Both resigned, nevertheless, shortly after the scam was
brought to light. Despite Diamond’s resignation he was granted another 12
months of salary, estimated at £1.35 million. The video below sees Agius vehemently
refuting any knowledge of the fixing.
Please take a look at this link to see a Barclays specific timeline.
