Monday, August 27, 2012

The Libor Rate – will heads roll?

The libor rate scandal is still ongoing and seems to be hotting up as more information comes to light about what actually has been going on behind the scenes in the banking industry.

The Libor rate or LIBOR (London Inter Bank Offered Rate) is the interest rate that banks charge each other for loans.

This rate, which is set each day at by the British Banking Association is based on figures and borrowing costs submitted from 16 major UK banks and sets the figure for inter bank lending. Banks need to borrow from each other and lend to other banks to make a profit so this rate is of vital importance.

Manipulating the Libor rate by artificially lowering interest rates, the banks caused investors such as local councils and other public entities to get back smaller returns on their variable rate investments.

The Libor rate affects mortgage payments and the cost of borrowing on the High Street. When it comes down to this level it causes financial hardship for ordinary people, and the loss of jobs and services because of the low returns on public investments.

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On the 27th June 2012, Barclays were fined £290 million for rigging the Libor rates between 2005 and 2009 and Bob Diamond the chairman quit forgoing his £20 million bonus.

As the scandal and crisis deepened, the Bank of England entered the arena. A tissue of lies and misrepresentation has followed.

Mervyn King governor of the bank of England has likened the manipulation of the libor rate to rigging a cricket match.

He said there were similarities with betting in cricket, because nobody saw it and it wasn't a whole game being fixed but three or four no balls.

This sounds a bit glib. Fixing the libor rate appears to have been going on for years so was certainly more than a few isolated incidents and just because Mervyn King only heard of it a couple of weeks ago (and no one is suggesting otherwise) it doesn’t mean it wasn’t happening on a regular basis.

Ironically, RBS, already bailed out by the taxpayers because of their financial misdealing now seem set to pay a fine for yet again robbing the taxpayer.

However due to the bail out essentially the same taxpayers are again footing the bill.

Whether or not these corrupt bankers will face imprisonment is yet to be seen.

If public opinion was the law they would probably be strung up but it seems the worst that they can expect is to receive a reduce bonus payment.

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Barclays Bank Libor Rate scandal explained

The Libor Rate – will heads roll?