Page 11 - Barclays Bank (B)

However, a small shift in basis

point rates (a basis point, is
equal to one one-hundredth

of a percentage point- 0.01 )
would result in substantial

financial gains. Therefore, the

overall goal, of such rate

rigging behaviour was the increased profit a bank could make by

even a small basis point change in these rates and given the

enormous financial products linked to these rates (see appendix
2) it is easy to appreciate the incentive to manipulate them.

Barclays manipulated rates for at least two reasons. From as early

as 2005, traders sought particular rate submissions to benefit
their financial positions. Then, during the 2007–2012 global

financial crisis, they artificially lowered rate submissions to make
their bank seem healthy. The mortgage crisis in the US had caused

banks and investment funds globally to become nervous about

lending to each other without collateral. Consequently, firms that
relied on money markets to fund their businesses were paralyzed

by the inflating cost of short-term credit.

Traders and interest rate submitters of different banks from the
Libor and Euribor panel requested several favours of each other

verbally, by email and instant messaging. For example, to keep

the Libor rate for a specified currency and maturity low, or at a
certain level e.g. swaps traders often asked the Barclays

employees who submitted the rates to provide figures that
would benefit the traders, instead of submitting the rates the

bank would actually pay to borrow money.