{"id":741,"date":"2012-07-09T14:59:14","date_gmt":"2012-07-09T12:59:14","guid":{"rendered":"http:\/\/www.pauljorion.com\/blog_en\/?p=741"},"modified":"2012-07-10T12:56:24","modified_gmt":"2012-07-10T10:56:24","slug":"libor-we-aint-seen-nothing-yet","status":"publish","type":"post","link":"https:\/\/www.pauljorion.com\/blog_en\/2012\/07\/09\/libor-we-aint-seen-nothing-yet\/","title":{"rendered":"LIBOR: WE AIN\u2019T SEEN NOTHING YET<\/b>"},"content":{"rendered":"

Translated from the French<\/a> by Tim Gupwell<\/p><\/blockquote>\n

From the Financial Services Authority\u2019s Final Notice <\/a>of their decision, dated the 27th<\/sup> June, to impose an 85 million Pound fine on Barclays Bank (less a reduction of 30% for exemplary co-operation with the enquiry) due to their manipulation of the LIBOR interbank rates, two separate periods need to be distinguished. In the first period, which loosely spans the period from 2005 to 2007, rates were manipulated on trading floors by operators at a subordinate level; in the second period, which runs from 2007 to 2009 and which corresponds to the height of the crisis, rates were manipulated by these same subordinates following instructions from above.<\/p>\n

Unambiguous figures are to be found in the conversations reported in the documents. During the first period, the rate manipulations were usually around about 1 basis point (a hundredth of 1%) and sometimes 1.5 basis points; in the second period, it was a matter of manipulations varying from 17 to 46 basis points. In other words, they were of a completely different order of magnitude.<\/p>\n

When Bob Diamond, the former Chief Executive of Barclays, explained last Thursday<\/a> to a British Parliamentary Select Committee that he had been \u201cshocked\u201d and \u201cdisgusted\u201d by the behaviour of some of his employees, was he talking about the rank and file traders (the dozens of Kerviels that I discussed (in French) in my Friday video<\/a>) during the period from 2005 \u2013 2007, or about the Senior Bank Officers from the period 2007 to 2009? In my opinion, to ask the question is to know the answer.<\/p>\n

That said, as I recalled in my accounts of the \u2018LIBOR affair\u2019, from the earliest in April 2008 (L\u2019affaire du LIBOR<\/a>) [in French], to the most recent (LIBOR: Delayed indignation<\/a>), it can be said that on the one hand, minimizing the rates submitted by the 16 banks concerned for the calculation of the\u00a0 LIBOR virtually amounted to a national duty in the climate of panic which had caught hold of the financial markets; and, on the other hand, according to what we already knew in 2008 and which was confirmed in the Final Notice<\/em>, of all the London Banks it was in fact Barclays which was the most reluctant to falsify the figures. The following observation is representative of this point of view:<\/p>\n

\u201c\u2026.on 18 September 2008, a Submitter stated in a telephone conversation with Manager D that he would put in a one month US dollar LIBOR submission of 4.75 because that was where he had obtained money in the market\u2026. The Submitter agreed to lower Barclays\u2019 one month LIBOR submission to 4.50. The next highest submission was 50 basis points lower than Barclays\u2019 submission on that day.\u201d (p.30)<\/p>\n

Let us be clear about this: 1) From 2005 \u2013 2007, a \u201cdozen Kerviels\u201d working for Barclays regularly submitted, for the purpose of calculating the LIBOR ( at the same time as the 15 other banks), rates that had been manipulated upwards or downwards to the tune of 1 to 1.5 basis points. 2) From 2007 \u2013 2009, in the case reported, a Senior Bank Officer instructed a subordinate to minimize the rate observed by 25 basis points. 3) On the same day, in another bank in the city of London (the one which manipulated the rates the least amount after Barclays), a senior Bank officer instructed a subordinate to submit in the bank\u2019s name a rate which had been manipulated by at least 75 basis points \u2013 25 [like Barclays] plus 50 [additional].<\/p>\n

In conclusion, we can say that of the sixteen banks which submitted rates for the calculation of the LIBOR (18 nowadays), fifteen cheated even more than Barclays. This latter had a 85 million Pounds (107 million Euros) fine imposed upon it (before it was reduced), and has lost, since last week, Chief Executive Bob Diamond, Chairman Marcus Agius, and Chief Operating officer Jerry del Missier – who were all firmly shown the door by the FSA, the Bank of England and the Chancellor of the Exchequer. This latter, George Osborne, declared that the facts revealed were \u201csymptomatic of a financial system that elevated greed above all other concerns and brought our economy to its knees\u201d and added that<\/em> \u201cfraud is a crime in ordinary business; why shouldn’t it be so in banking?\u201d<\/p>\n

We can only approve of the British Chancellor\u2019s remarks. But what do the mangers of the other 15 banks who were responsible for submitting rates for LIBOR think of all this? In any case I would rather be in my shoes than theirs.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

\n

Translated from the French<\/a> by Tim Gupwell<\/p>\n<\/blockquote>\n

From the Financial Services Authority\u2019s Final Notice <\/a>of their decision, dated the 27th<\/sup> June, to impose an 85 million Pound fine on Barclays Bank (less a reduction of 30% for exemplary co-operation with the enquiry) due to their manipulation of the LIBOR interbank rates, two […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","footnotes":""},"categories":[5,6,12],"tags":[158,173,157],"class_list":["post-741","post","type-post","status-publish","format-standard","hentry","category-economy","category-finance","category-human-complex-systems","tag-barclays","tag-fsa","tag-libor"],"_links":{"self":[{"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/posts\/741","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/comments?post=741"}],"version-history":[{"count":6,"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/posts\/741\/revisions"}],"predecessor-version":[{"id":758,"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/posts\/741\/revisions\/758"}],"wp:attachment":[{"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/media?parent=741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/categories?post=741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pauljorion.com\/blog_en\/wp-json\/wp\/v2\/tags?post=741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}