Libor scandal: Was Barclays the worst offender?
By James Quinn Last Updated: 9:33PM BST 30/06/2012
As the fate of Barclays chief Bob Diamond hangs in the balance, James Quinn looks at how the Libor scandal could have wide-reaching consequences for the banking industry as a whole.
“We have to get kicked out of the fixings tomorrow,” read the email. “We need a 4.17 fix in 1m. We need a 4.41 fix in 3m.”
The email, from a senior Barclays Capital trader in the bank’s offices in the MetLife building looking down over New York’s Park Avenue, to a trader in the bank’s London offices in Canary Wharf, could have seemed innocuous to the unknowing eye.
But what the American banker was doing was telling his British counterpart exactly where the bank needed the Libor – the London Interbank Offered Rate used to set interest rates for everything from mortgages to complex derivatives – to be fixed.
For one-month Libor – “1m” – it needed it to be low. For three-month Libor – “3m” – it needed to be high.
And so it went on. Three months later, a BarCap trader in London pinged an email to a submitter, one of the bank’s staff responsible for accurately submitting information about interest rates to the British Banking Association (BBA), which then aggregated the data and produced the Libor rates. This time the trader wanted the opposite result to his colleague three months earlier: “Your annoying colleague again… Would love to get a high 1m. Also if poss a low 3m… if poss… thanks.”
Just two instances out of numerous examples found by investigators at the Financial Services Authority (FSA) in London, and their counterparts at the Commodities Future Trading Commission (CFTC) and the Department of Justice (DoJ) in Washington.
Following a four-year investigation, at 1.30pm last Wednesday the sheer scale of Barclays’ role in attempting to fix Libor rates was disclosed with a statement from the bank marked “Barclays Bank PLC settlement with authorities”. The five-paragraph announcement did not go into any detail, other than to disclose that the bank was to pay £290m in fines, the largest ever levied against a bank.