Is the Libor scandal a result of regulatory oversight?
According to the financial disclosure requirements framework, the market is responsible for the monitoring and controlling of regulators to prevent regulatory oversight such as the recent Libor scandal. July 24, 2012 | Tiah Wen LiFollowing Barclay’s London Interbank Offer Rates (Libor) scandal, Deutsche Bank, HSBC, Societe Generale and Credit Agricole have joined the list of banks under investigation. Royal Bank of Scotland, UBS, and Lloyds are also being scrutinized. Those involved may be brought to court to face US prosecutors before the September 3rd Labour Day holiday. Libor is the key factor in determining a wide range of interest rates paid by businesses and consumers, including some mortgages, credit cards and housing loans. The setting of Libor is done through the participation of eighteen major banks globally. Each morning, participating banks are required to submit separately projected figures for the interest rate at which it expects to borrow money from the others. Once it receives the rates, The British Bankers’ Association then throws out the highest and lowest outliers, averaging the remaining ones. This time round, regulators have also come under scrutiny as US and UK lawmakers blame them for failing to take preventive action to stop the manipulation from taking place. BBC reported an improper conversation between Bob Diamond, former CEO of Barclays and Paul Tucker from Bank of England back in 2008, suggesting that Tucker may have encouraged or even suggested distorting the figures. This would not come as a shock, since regulators would have wanted to cover-up the fact that interbank liquidity was drying up as the truth would have made the global financial crisis take a turn for the worse. At a time when bank confidence was at its lowest, the last thing that regulators would have wanted was to create another panic wave over Libor. Regulators have also turned to pointing fingers at each other. Mervyn King, governor of the Bank of England, stressed that US authorities did not raise any concerns about misreporting during the 2008 crisis when there was criticism about the effectiveness of the Libor. US Treasury Secretary, Timothy Geithner, h... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Regulation, Risk and Regulationriskregulation,Risk and Regulation, Regulation,Risk and Regulation, Keywords:Libor, Bank Of England, Paul Tucker, RBS, UBS, Barclays, Deutsche Bank, HSBC, Societe Generale, Credit Agricole, Bob Diamond Libor, Bank of England, Paul Tucker, RBS, UBS, Barclays, Deutsche Bank, HSBC, Societe Generale, Credit Agricole, Bob Diamond
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