[jolepp]

In its £290m settlement with the Financial Services Authority in the UK, and the Commodity Futures Trading Commission and Department of Justice in the US, Barclays has owned up to something very simple and - many would say - profoundly shocking: for four years between 2005 and 2009, it lied about the interest rate it was having to pay to borrow.

Here is today's statement from the CFTC:

"Barclays….attempted to manipulate and made false reports concerning both benchmark interest rates to benefit the bank's derivatives trading positions by either increasing its profits or minimizing its losses. The conduct occurred regularly and was pervasive."

The CFTC also says that after the start of the credit crunch in August 2007, all the way through to early 2009, Barclays made "artificially low…submissions" about the interest rate it was being forced to pay to borrow to "protect Barclays' reputation from negative market and media perceptions concerning Barclays' financial condition".

This was done, according to the CFTC, "as a result of instructions from Barclays' senior management".
...
Now to be clear, the CFTC is explicit that other banks were at it too. It says: "Certain Barclays Euro swaps traders, led at the time by a senior trader, coordinated with and aided and abetted traders at other banks in each other's attempt to manipulate Euribor, even scheming to impact Euribor on key standardised dates when many derivatives contracts are settled or reset."
...
Or to put it another way, it is widely expected that other big international banks will pay big fines and penalties in connection with this scandal.

As for Barclays, its top executives are mortified. The four most senior, led by Bob Diamond, the chief executive, are waiving their bonuses. And disciplinary action has been taken and is being taken against traders in New York, London and Tokyo who committed the offences.

But perhaps what is most important about all of this is that it is another shattering blow to the reputation of the banking industry, at a time when that reputation - many would say - is already at rock bottom.

BBC News - Barclays 'attempted to manipulate interest rates'

[Mareket]

The four most senior, led by Bob Diamond, the chief executive, are waiving their bonuses.

My God, it's THAT bad!? I'm amazed they don't think they need bonuses after cheating the system and lying for years. Then again, I'm sure they were happy to give themselves a bonus for getting away with it until now.

that reputation - many would say - is already at rock bottom.

I can't imagine it getting any worse, unless all the chiefs were found to be paedophiles or cannibals or something. I really can't stand banks

[jolepp]

related:

Bank of England governor Sir Mervyn King has called for a change in the banking culture, saying that customers have received "shoddy" treatment.

He added that bank leaders had "let down" the many honest and hard working people in the financial sector.

Sir Mervyn's comments come on the day banks were found to have mis-sold financial products to small businesses.

It is the third major scandal this year, following manipulation of lending rates and loan insurance mis-selling.

Speaking at the launch of the Bank's twice-yearly Financial Stability report, Sir Mervyn demanded immediate and far-reaching action to reform the structure and culture of the UK banking industry.
...
He called for the government to implement the recommendations of the Vickers Commission on banking, which said that more risky investment banking should be separated from day-to-day banking needs of individuals and small businesses.

BBC News - Bank of England head says banks must change culture

[jolepp]

related:

Shareholders "must get a stronger grip" to prevent corruption in banks, Business Secretary Vince Cable says.

Writing in the Observer after Barclays was fined for trying to rig the Libor inter-bank lending rate, he condemns the "incompetence, corruption and greed... endemic in British banking".
...
He suggests four steps for sorting out the banking "mess":

• Making banks safe so there is no further risk of collapse and rewarding "sensible banking" rather than "hoarding" and "speculative trading"
• Carrying out the Vickers reforms, which are designed to segregate retail and business banking
• Shareholders taking more responsibility
• Changing the culture of the sector and encouraging the introduction of new business models.

...

BBC News - Bank shareholders must get stronger grip, Cable says

[jolepp]

related:

Barclays has promised a "root and branch review" and announced the resignation of its chairman Marcus Agius following the inter-bank lending rate-fixing scandal.
...
Barclays' chief executive Bob Diamond will appear before MPs on the Treasury Committee on Wednesday.
Mr Agius is due to answer their questions on Thursday.

Mr Agius has also stepped down as chairman of the British Bankers' Association, which is responsible for compiling Libor.
...
Mr Agius, who also serves on the BBC's executive board, said last week's events were evidence of "unacceptable standards of behaviour within the bank".

He said the findings had "dealt a devastating blow" to Barclays' reputation.
...

BBC News - Barclays to review 'flawed' practices as Agius resigns

[jolepp]

Barclays chief executive Bob Diamond has resigned with immediate effect.

The move comes less than a week after the bank was fined for trying to manipulate inter-bank lending rates, sparking a government inquiry and calls for criminal investigations.

Mr Diamond said he was stepping down because the external pressure on the bank risked "damaging the franchise".
...

BBC News - Barclays boss Bob Diamond resigns amid Libor scandal

[wildman]

"Barclays to review 'flawed' practices"

Bull Shit - the practices were working exactly as intended.
The only flaw was getting caught.

[dadipentak]

So maybe this arrangement whereby the banks regulate themselves isn't working out so well, huh? Can't imagine why. I mean they're all so well dressed and articulate and, you know , fun to be around.

[jeffkrol]

"Barclays to review 'flawed' practices"

Bull Shit - the practices were working exactly as intended.
The only flaw was getting caught.

So maybe this arrangement whereby the banks regulate themselves isn't working out so well, huh? Can't imagine why. I mean they're all so well dressed and articulate and, you know , fun to be around.

[jolepp]

related: BBC News - Libor scandal and the law

[wildweasel]

Bank of England ‘thought Libor was a brand of toilet cleaner’

[Winder]

UPDATE 2-INSIGHT-Fed knew of Libor issue in 2007-08, proposed reforms | Reuters


According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a "Fixing LIBOR" meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

It is unclear precisely what was discussed at this meeting or who attended. Among those invited, along with Geithner, was William Dudley, who was then head of the Markets Group at the New York Fed and who succeeded Geithner as its president in January 2009. Also invited was James McAndrews, a Fed economist who published a report three months later that questioned whether Libor was manipulated.

"A problem of focusing on the Libor is that the banks in the Libor panel are suspected to under-report the borrowing costs during the period of recent credit crunch," said that report in July 2008 that examined whether a government liquidity facility was helping ease pressure in the interbank lending market.

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were "on the case reasonably quickly" after questions were raised in 2008.

"It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting," Duffie said. "I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior."

[Winder]

Geithner identified Libor problems in '08 - Jul. 13, 2012

[jeffkrol]

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were "on the case reasonably quickly" after questions were raised in 2008.

what year is it????

[Winder]

what year is it????

For the government, 5 years is practically the speed of light. I doubt they would have done anything if the issues had not gone public. The big question is how many other banks were engaged in the same activity and to what extent.