News / Europe

British Banking Scandal Likely to Spread

A view of Barclays headquarters at London's Canary Wharf financial district,  July 3, 2012.A view of Barclays headquarters at London's Canary Wharf financial district, July 3, 2012.
x
A view of Barclays headquarters at London's Canary Wharf financial district,  July 3, 2012.
A view of Barclays headquarters at London's Canary Wharf financial district, July 3, 2012.
A scandal over a major British bank unfairly manipulating interest rates threatens to engulf more major banks around the world.  The case has already seen Barclays Bank pay a huge fine, sparked a flurry of investigations and hearings, and might result in changes in laws that govern financial firms.  

Impact

Barclays is one of 18 banks that help set a daily benchmark for many interest rates around the world by reporting what they expect to pay to borrow money.  The result is called the “LIBOR” which stands for "London Interbank Offered Rate."  

White-collar crime expert and former Department of Justice attorney Michael Weinstein says LIBOR has a huge impact on global commerce.

“It is fair to say it is not millions, it's not billions, it's trillions of dollars impacted by the LIBOR rate.  So the impact is not only domestic here in the United States, but globally and internationally,” Weinstein said.

Some of the efforts to manipulate interest rates occurred during the financial crisis, when investors, depositors, other banks, and regulators were worried about the financial strength of banks.

Barclays paid a fine of around $450 million for, among other things, lying to rate-setting officials by saying they were paying a lower interest rate than they actually were.

Pace University expert on corporate governance, John Alan James, says Barclays misled officials because a low interest rate is a vote of confidence in a borrower by a lender.

“They come in low and it shows that they are stronger than they really are,“ James said.

On other occasions, Barclays’ officials falsely said the interest rate they had to pay was higher than it actually was, in an effort to make money on investments that were essentially a bet that the LIBOR would rise.

Both actions hurt consumers.

Manipulation

Manipulating the LIBOR interest rate higher means people were unfairly forced to pay more on mortgages, student loans and other transactions.   And manipulating the interest rate lower unfairly cut the returns paid to people who rely on savings and investments with interest rates tied to LIBOR rates.  

Weinstein says investigations are underway in a number of countries and the scandal could spread widely.

“I think you are going to see almost all of the world’s major banks get hit with this to some degree.”

He adds he expects governments and regulators to tighten rules and supervision of banks in response.

But Hofstra University finance professor Anoop Rai says lawmakers and regulators must strike a careful balance; too little regulation allows too many dishonest practices, but too much supervision slows commerce and hurts the economy.

“It is very difficult to get an optimal set of regulations, too much or too little, said Rai. "And over time, markets forget, and we see this recurring behavior so many times,
one just has to scratch their head and say how do we get buyers to beware.”

Nevertheless, Pace University's John Alan James expects that some actual, constructive change will come from this scandal because, as he puts it, “This is too big to put under the rug. “

You May Like

Kurdish Party Pushes Political Gamble to Run in Turkey Poll

HDP announces it will run as political party instead of fielding independent candidates in June election, but faces tough 10 percent threshold More

Twitter Targets Islamic State

New research shows suspending Twitter accounts of Islamic State, its supporters has been effective; group, its backers are facing 'significant pressure,' says terrorism expert More

Video Former Sudan 'Lost Boy' Becomes Chess Master in NYC

Majur Juac made the leap from being a refugee in Africa to a master chess champion in US, where he shares his expertise with students More

This forum has been closed.
Comment Sorting
Comments
     
by: Raymond Murdock from: Washington DC
July 14, 2012 11:55 AM
For some time this part was left in free alberdio banks that handle only the economies of each country. Inadmissible. Speaking of Economy and Banks is like talking about water and oil. Do not mix. Much less let them engage in Economy. The question is why does this happen? Overconfidence. Overestimation of honesty. Drivers or inspections obsolete. Conspirators or groups to commit unlawful. Loopholes. Jurisprudence which validates fraudulent acts without exemplary punishment. Free dubious agreements and guarantees to escape or avoid justice. Too obvious and made ​​worse by lack of something elemental?.-


by: Lorain from: USA
July 11, 2012 2:46 PM
Olympics in Britain... who want to go and see London...??? might as well stay in Cairo or Baghdad... UK has become Muslime

In Response

by: Mary from: USA
July 11, 2012 9:33 PM
London's a fascinating city and one of the most interesting places I've ever been; you're doing youself no favors by so blithly writing it off.
Your demographics are seriously off, by the way. The vast majority of the British are at least nominally Christian and secular in practice. No one's installing Sharia over common law there anytime soon.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
NASA Monitors Earth’s Vital Signs From Spacei
X
Rosanne Skirble
January 27, 2015 5:05 PM
The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Saved By a Mistake - an Auschwitz Survivor's Story

Dagmar Lieblova was 14 when she arrived at Auschwitz in December 1943, along with her entire Czech Jewish family. All of them were to die there, but she was able to leave after several months due to a bureaucratic mix-up which saved her life. Now 85, with three children and six grandchildren, she says she has a feeling of victory. This report by Ahmad Wadiei and Farin Assemi, of RFE/RL's Radio Farda is narrated by RFE’s Raymond Furlong.
Video

Video Weekly Protests in Korea Keep Japanese WWII Atrocities Alive

Every week in Seoul protesters gather in front of the Japanese Embassy to demand an apology and reparations from Tokyo for the thousands of South Korean women who were forced into prostitution during World War II. Although this year marks the 70th anniversary of the end of the war, these protestors have helped keep the issue of comfort women alive and made it difficult for Japan to move beyond its past wartime atrocities. VOA's Brian Padden reports from Seoul.
Video

Video Exercise: New Prescription for Parkinsons Disease

Exercise could be the new prescription for Parkinson's Disease, a progressive disorder of the nervous system that affects movement. More than six million people worldwide suffer from Parkinsons and they're traditionally treated with medication and surgery. Shelley Schlender has more.
Video

Video Brussels Shaken as New Greek Leader Challenges Europe’s Austerity Drive

Greece’s youngest-ever prime minister, 40-year-old Alexis Tsipras, was sworn in Monday after his victorious far-left Syriza party entered a coalition with far right rivals. Tsipras says he will restore dignity to Greece by ending spending cuts. So begins a new chapter for the country at the epicenter of Europe’s economic crisis - a change that has sent tremors across the continent, as Henry Ridgwell reports from London.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Oil Price Drop Troubles Texas Producers

As oil prices have fallen over the past several months, drilling operations have slowed in some parts of the United States - including Texas, the state that surpasses all others in energy production. The Lone Star State’s energy output has been boosted in recent years by development of resources trapped deep below ground in the Eagle Ford shale deposit, which stretches across south central Texas. As VOA’s Greg Flakus reports from Karnes City, Texas, the drop in oil prices has created concerns,
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid