Banking is rotten to the core
The Securities and Exchange Commission (SEC) in the US and the Financial Services Authority (FSA) in the UK have fined Barclays Bank a combined $450million for manipulating the LIBOR rate over a period of years.
Why isn’t a criminal investigation underway?
1. London InterBank Offered Rate (LIBOR) is used to reference $360trillion worth of contracts worldwide. Systematic manipulation of LIBOR will have yielded $billions in profits or avoidance of losses which means the fines are only a fraction of what will have been gained. This is criminal fraud on a massive scale and demands indictments; the people responsible (including senior management) should go to jail.
2. It has been announced that other banks are under investigation which suggests this criminality is rife amongst the banking community and prosecutions need to go beyond Barclays. The British Banking Association (BBA) oversees the setting of LIBOR through a subsidiary BBA LIBOR Ltd. governed by an independent Board (http://www.bbalibor.com/governance). The members of this board are not published on BBA LIBOR’s website. Investigation reveals four members were also directors of banks or dealers in securities (Coutts & Co, C Hoare & Co., Tullett Prebon, and ICAP). The first two are private banks and would only be peripherally involved in LIBOR related products. Tullett Prebon and ICAP are major players in the money markets which suggests these directors had an obvious conflict of interest and the “independence” of the governing body must be in question. Furthermore it is Angela Knight, BBA Chief Executive since 2007 and former Economic Secretary to the Treasury in John Major’s government, who is also a director of Tullett Prebon. Clearly she has questions to answer in respect of the BBA’s role. Bank of England Governor Mervyn King claims to be shocked and disgusted by the revelations as if it has nothing to do with him but the Bank of England has had regulatory reponsibility for banking thorughout the period in question.
3. Many of those involved will have received six or seven figure bonuses as a result of this fraudulent trading. These bonuses will be the proceeds of crime and should be recovered.
Occupy London Economics Working Group has been calling for radical reform of banking and supervision. These revelations of the LIBOR fraud vindicate its position.