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LIBOR, or the London Interbank Offered Rate, is the average
interest rate at various maturities at which global banks borrow
funds from other banks. LIBOR is calculated by Thompson Reuters in
London using interest rate estimates submitted by traders at
leading banks. Over $360 trillion of assets globally are indexed to
LIBOR.
What is the allegation regarding bank manipulation of
LIBOR?
Barclays Bank has been fined $450 million by U.S. and U.K.
regulators for intentionally submitting false rates to manipulate
LIBOR for its own gain. Barclays submitted deceitful rates to
increase profit in their derivatives portfolio and to appear more
financially sound. There is an emerging contention that the LIBOR
manipulation was tacitly endorsed by government regulators.
What are the potential future implications of the scandal?
Regulators in the US, UK, EU, Japan, Canada, Switzerland, and
others are investigating the possibility that LIBOR has been
manipulated by other large, multinatioal banks. While some have
suggested there will be a wave of ligation against the banks,
it's very difficult to tell if this actually harmed
borrowers. This scandal ensures that more investigations and
shaken confidence will persist in an already fragile financial
sector.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Global Regulatory Cooperation
