Libor Case Study

Today, it is a known fact that Libor was manipulated and the culprits are some of the largest banks in the U.K and USA. The manner in which they manipulated Libor is still somewhat an issue of an ongoing investigation, although the culprits have paid hefty fines and some have pleaded guilty, while other banks that were thought to be involved have excused themselves from the allegations.

Firstly, Barclays bank have come forward to accept the allegations of lowering borrowed rates but are skeptical of their intent to gain anything from it. According to (McConnell, 2013) they deliberately and systemically manipulated the borrowing rates, and it was a work of collusion, this led them to making official inquiries into manipulation of LIBOR at 3

In several articles, and for one on the Bloomberg in September 2007, which titled “Barclays takes a money beating”, firstly, the journalists observations was that Barclays was submitting USD Libor rates consistently higher than other banks and lastly, that Barclays had approached the bank of England for overnight funds, a number of times in the previous night. This was of course, so that they could use the Libor calculation process to signal to the market that their operating costs are lower (healthier) than they really were. The inquiry into Libor manipulation at Barclays (CFTC Barclays, 2012) noted that, after senior management discussions, Senior Barclays Treasury managers instructed the USD Libor submitters and the supervisor to lower Barclays Libor submissions, so that they were closer in range to the submitted rates by other banks but not so high as to attract media attention. Although such an order won’t comply with the BBA rules for submitting Libor rates, it would be expected such a rule would be a normality at Barclays, as one of its senior managers sat on the BBAFX&MMC committee at the time. Over the next few months, Barclays lowered its Libor submissions, not only in USD but also other currencies, and titled it as strategy called “no head above the parapet” also referred to as “low-balling” (FSA Audit 2013). This for sure sent, or in other instances, a message of Barclays being