Barclays Libor Scandal

Posted on Posted in academic, blog posts

Barclays bank faced accusations of manipulating the LIBOR – London Interbank Offered Rate – between 2005 and 2009, a charge for which the management admitted wrongdoing. The LIBOR is a special and essential interbank benchmark rate for the international financial market. LIBOR forms the basis of international financial transactions, thus enabling banks to borrow money from each other. Barclays bank dishonestly manipulated the LIBOR rates between 2005 and 2009 in order to make huge profits, as well as limit losses from its derivative trades (Nocera, 2012).
Different classes of financial players were hurt when the LIBOR rates were manipulated. The first group to be affected were the borrowers. When Barclays lowered the LIBOR rates, the amount of debt held by borrowers increased. The second group of victims was the traders of hedge funds, such as the Eurodollar future. On the other hand, Barclays bank was the primary beneficiary of LIBOR manipulation. The bank increased its profit gains and avoerivative trades, acquiring financial advantages in its operations. Other major financial market lenders also gained from the LIBOR manipulation (Great Britain, 2012).
According to Robert Diamond, Barclays’ CEO, employees in derivative trading were the most responsible for manipulating the LIBOR rates. However, he was the overall overseer in the bank. When market competitors are cheating, a leaders response should involve upholding integrity. In essence, a leader should help the regulators to identify manipulative market competitors. Market regulators are not expected to ask bank leaders to cheat. However, a lead