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

UN: 1 Million Somalis at Risk of Hunger

Group warns region is in dire need of humanitarian aid, with at least 200,000 children under age of five acutely malnourished as drought hits southern, central part of nation More

Human Rights Groups Allege Supression of Freedoms in Thailand

Thailand’s military, police have suppressed release of independent report assessing human rights in kingdom during first 100 days of latest coup More

Jennifer Lawrence Contacts FBI After Nude Photos Hacked

'Silver Linings Playbook' actress' photos were posted on image-sharing forum 4chan; Federal Bureau of Investigations is looking into matter 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.
Ukraine Schools Resume Classes, Donate to Government Forcesi
X
September 02, 2014 12:58 PM
A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video Ukraine Schools Resume Classes, Donate to Government Forces

A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video US Detainees Want Negotiators for Freedom in North Korea

The three U.S. detainees held in North Korea were permitted to speak with foreign media Monday. The government of Kim Jong Un restricted the topics of the questions, and the interviews in Pyongyang were limited to five minutes. Each of the men asked Washington to send a representative to Pyongyang to secure his release. VOA’s Carolyn Presutti has our story.
Video

Video Internet, Technology Offer New Tools for Journalists

The Internet and rapidly evolving technology is quickly changing how people receive news and how journalists deliver it. There are now more ways to tell a story than ever before. One school in Los Angeles is teaching the next generation of journalists with the help of a state-of-the-art newsroom. Elizabeth Lee has this report.
Video

Video Turkmen From Amerli Describe Survival of IS Siege

Over the past few weeks, hundreds of Shi'ite Turkmen have fled the town of Amerli seeking refuge in the northern city of Kirkuk. Despite recent military gains after U.S. airstrikes that were coordinated with Iraqi and Kurdish forces, the situation remains dire for Amerli’s residents. Sebastian Meyer went to Kirkuk for VOA to speak to those who managed to escape.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.

AppleAndroid