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

Turkey: No Ransom Paid for Release of Hostages Held by IS Militants

President Erdogan hails release of hostages as diplomatic success but declines to be drawn on whether their release freed Ankara's hand to take more active stance against insurgents More

Audio Sierra Leone Ends Ebola Lockdown

Health ministry says it has reached 75 percent of its target of visiting 1.5 million homes to locate infected, educate population about virus More

US Pivot to Asia Demands Delicate Balancing Act

As tumult in Middle East distracts Obama administration, efforts to shift American focus eastward appear threatened 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.
Natural Gas Export Plan Divides Maryland Towni
X
Deborah Block
September 21, 2014 2:12 PM
A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Natural Gas Export Plan Divides Maryland Town

A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Difficult Tactical Battle Ahead Against IS Militants in Syria

The U.S. president has ordered the military to intensify its fight against the Islamic State, including in Syria. But how does the military conduct air strikes in a country that is not a U.S. ally? VOA correspondent Carla Babb reports from the Pentagon.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Alibaba Shares Soar in First Day of Trading

China's biggest online retailer hit the market Friday -- with its share price soaring on the New York Stock Exchange. The shares were priced at $68, but trading stalled at the opening, as sellers held onto their shares, waiting for buyers to bid up the price. More on the world's biggest initial public offering from VOA’s Bernard Shusman in New York.
Video

Video Obama Goes to UN With Islamic State, Ebola on Agenda

President Obama goes to the United Nations General Assembly to rally nations to support a coalition against Islamic State militants in Iraq and Syria. He also will look for nations to back his plan to fight the Ebola virus in West Africa. As VOA White House correspondent Luis Ramirez reports, Obama’s efforts reflect new moves by the U.S. administration to take a leading role in addressing world crises.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Militant Assault in Syria Displaces Thousands of Kurds

A major assault by Islamic State militants on Kurds in Syria has sent a wave of new refugees to the Turkish border, where they were stopped by Turkish border security. Turkey is already hosting about 700,000 Syrian refugees who fled the civil war between the government and the opposition. But the government in Ankara has a history of strained relations with Turkey's Kurdish minority. Zlatica Hoke reports Turkey is asking for international help.
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid