Barclays just the tip of the iceberg as banking braced for more scandals [View all]
Source: GuardianUK
A record £290m fine imposed on Barclays for attempting to manipulate the price of a crucial interest rate known as Libor – the London interbank offered rate – and its European equivalent Euribor – has raised the prospect that the entire market has been rigged since as long ago as 2005.
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This has sparked speculation that the fine against Barclays – the biggest sanction ever announced by the FSA, whose portion of the fine was £59.5m – could prove to be one of the smallest when the investigations are completed. Deutsche Bank became the latest to see its name linked with Libor-fixing on Friday, when the German financial regulator, Bafin, was revealed to be investigating it. Shares in the German bank fell although it had already admitted that it had been subpoenaed by a number of authorities in Europe and the US earlier in the year.
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The immediate political fallout of the Libor crisis is the creation of a cross-party committee, chaired by Tory MP Andrew Tyrie, which will look at the wider issue of the culture and practices in the banking sector during what George Osborne has called the "age of irresponsibility". There are still calls by Labour for a full-blown public inquiry, although efforts to push this through the Commons failed this week after a rowdy debate by MPs. The FSA would stress that it has worked with international regulatory bodies and has been co-ordinating with the Serious Fraud Office over the Libor affair.
More broadly, the coalition has attempted to change the entire way the City is regulated. The FSA will be shut next year, with banking regulation moving to a subsidiary of the Bank of England and consumer regulation being handled by a new body. The requirement of banks to ringfence their high street operations from investment banks is also intended to tackle systemic risk – although this does not need to be implemented until 2019.
Read more: http://www.guardian.co.uk/business/2012/jul/08/banking-scandals-barclays
Money quote (if you are a late night comedian) from this piece: "More recently, bankers have realised there is an image problem."
No, really? Heh.
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