Page 30 - Bank Case Studies

LIBOR: 2012

In June, 2012, the FSA fined Barclays
£290m ($450m) for "serious and
widespread" misconduct for trying to

manipulate a key bank interest rate which
influenced the cost of loans and mortgages

– the London Interbank Offered Rate
(Libor). The fine was part of an international investigation into the

setting of interbank rates between 2005 and 2009.

Specifically, Barclays' misconduct related to the daily setting of Libor

and the Euro Interbank Offered Rate (Euribor). These were two of
the most important interest rates in the global financial markets and

directly influenced the value of trillions of dollars of financial deals
between banks and other institutions.

Barclays admitted that a group of traders lied about what it was

costing the bank to borrow and were working with other banks to try
to fix the interest rate. The FSA then started looking into other banks

which implied that Barclays was simply the first bank to settle.

Libor Setting

The Libor is supposed to be the total assessment of the health of the

financial system. However, the Libor scandal arose when it was

discovered that banks were falsely inflating or deflating their rates so
as to profit from trades, or to give the impression that they were

more creditworthy than they were.