Blame For Interest Rate Manipulation Scandal Is Shifting Toward Global Regulators

Tuesday, July 10, 2012 10:04
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Blame For Interest Rate Manipulation Scandal Is Shifting Toward Global Regulators

Tags: banks | fraud | regulation

Regulators across the globe are coming under the glass as the interest rate manipulation scandal spreads to possibly include sanctions against 10 major banks including UBS, JPMorgan Chase, and Citigroup. The London Interbank Offer Rate (Libor) is the benchmark used to price over $350 trillion in financial products such as credit cards, mortgages, and consumer loans.

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Civil suits against the banks are also increasingly likely. Paul Tucker received criticism from the Bank of England for his apparent lack of reporting low-balling practices. Low balling involves inflating the health of banks—essentially underreporting Libor submissions—to alleviate concerns about bank health. It appears that low balling occurred often up to and during the 2008 financial crisis.
 
Barclays is trying to shift the blame for its role in low balling to regulators whom it says approved its actions. The bank admitted the practice to the Financial Services Authority (FSA) in two separate phone calls during the fall of 2008. It has gone so far as to accuse Tucker of encouraging the practice.
 
Meanwhile, former Barclays head Robert Diamond has decided not to accept bonuses totaling £20 million to help the bank control the damage from public outrage at the revelation of its Libor abuses. The bank has also spent $450 million to investigate the fixing of Libor rates by Barclays staff.
 
 

 

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