The LIBOR scandal continues to refuse to go away. LIBOR stands for the London Interbank Offered Rate and essentially it is a mechanism to set interest rates based on the rates which banks themselves are lending money to one another. The rates also apply to transactions in foreign currency and are set on a daily basis. LiBOR has an influence on literally trillions of Dollars. What started as a fiddle by Barclay’s bank as a ruse to maintain share value and imply that they were having no problems obtaining funds, developed into a scandal where banks were colluding to manipulate the values for direct financial benefits to their investment arms.
So far, fines totalling $3.7 billion have been levied against banks involved in the scandal which ran from 2007 to mid-2011 (according to what we know currently). This figure is set to rise significantly after an American regulator announced that it will be pursuing legal action against 16 banks, including some very well-known names. The Federal Deposit Insurance Company is alleging that the manipulation of LIBOR caused significant losses to some 38 US banks which failed during the worst of the Global Financial Crisis in 2008.
The banks named in the lawsuit include Bank of America, JPMorgan Chase, Deutsche Bank, Lloyds Bank, Credit Suisse, UBS, Barclays, HSBC, Citigroup and Royal Bank of Scotland and Rabobank. The action also names the British Bankers’ Association (BBA) which was responsible for setting LIBOR. In a statement made to AFP news agency, FDIC noted: "BBA participated in the alleged scheme to protect the revenue stream it generated from selling Libor licenses and to appease the Panel Bank Defendants that were members of the BBA".
In most walks of life, the LIBOR scandal would have triggered a major fraud enquiry and resulted in criminal prosecutions for all those involved, but although some criminal prosecutions seem likely, the world of high finance doesn’t seem to operate under the same laws that the rest of us must abide by.