Barclays scandal sends shockwaves through global finance
‘When the financial rewards are so big, executives
try to cheat the system’:
UK: The Barclays rate-rigging scandal is sending shockwaves through
world finance, putting ethics and regulation under scrutiny, and raising
the prospect of criminal charges in a sector-wide global probe.
Britain's Serious Fraud Office said Friday it will investigate the
interbank rate manipulation scandal which has engulfed Barclays, forced
three top resignations, tainted the City of London and sparked a
political firestorm.
Barclays was fined 290 million ($452 million, 360 million euros) by
British and US regulators just over one week ago, for attempted
manipulation of Libor and Euribor interbank interest rates between 2005
and 2009.
“The Libor scandal reveals a lack of honesty amongst dozens of
employees -- not just at Barclays -- when the financial rewards are so
big for cheating the system, the chances of getting caught slim and the
pressure from management is very great,” Wilsher said.
Barclays became the first bank to be fined as part of a global probe
into suspected manipulation of the twin interest rates that are crucial
to the operation of short-term financing and global markets.
British lawmakers voted on Thursday to hold a parliamentary
investigation into the scandal, instead of a full judicial inquiry.
“This is a multi-bank issue -- albeit evidence and fines for other
culpable banks will probably dribble out over a period of many months or
years,” said Ian Gordon, banking sector analyst at Investec.
“In broad terms, the issue itself and the associated fallout are
damaging for the financial sector, both in reputational terms, the costs
of investigation and fines -- and any potential redress.
“Moreover, the issue helps to distract from and hence damage any
initiatives to increase the flow of lending to the economy, with obvious
negative consequences,” Gordon said.
BNP Paribas analysts agreed that the crisis had the potential to
engulf other lenders.
“As far as we are aware, the regulators have so far not disclosed a
full list of banks being investigated,” they said in a research note to
clients. They added that “additional fines ... cannot be ruled out,
although it's impossible to assess the exact exposures”.
Libor (London Interbank Offered Rate) is a flagship instrument used
all over the world, affecting what banks, businesses and individuals pay
to borrow money. Euribor is the eurozone equivalent.
The Libor rate is calculated daily by data provider Thomson Reuters,
on behalf of industry body the British Bankers' Association, using
estimates from banks of their own interbank rates.
Euribor is provided by the Brussels-based European Banking
Federation, using data from 43 international banks.
Barclays has admitted that its traders had routinely submitted false
readings, as they attempted to benefit their own lucrative derivatives
deals.
The lender also posted lower Libor values from 2008 to prevent
speculation that it would require a government bailout such as rival
groups Lloyds and the Royal Bank of Scotland. “Barclays attempted to
manipulate and made false reports concerning two global benchmark
interest rates, Libor and Euribor, on numerous occasions and sometimes
on a daily basis over a four-year period, commencing as early as 2005,”
the Commodity Futures Trading Commission (CFTC) said on June 27.
The US watchdog added that employees at Barclays and its investment
bank arm Barclays Capital had sought to boost trading positions to
increase profits or minimise losses.
AFP
|