With all the talk about Barclay’s, and soon other banks we presume, manipulating LIBOR, I have had many people asking me what it is they actually did.
I found this article in the Times which explains what LIBOR is and what Barclay’s were accused of doing.
Essentially Barclay’s reduced its LIBOR rate dramatically towards the end of 2008, giving the impression that it was stronger than other banks, increasing its exposure and in the end making larger profits for itself.
LIBOR is calculated as an average rate of the 16 clearing banks in the UK, so Barclays acting aloone could not have moved the rate by very much at all, less than 0.1% or 1 basis point. And in all cases it was moved down and not up.
New evidence has emerged that perhaps the Bank of England encouraged Barclay’s to reduce its LIBOR rate so one thing is for sure this “scandal” is going to rage on for a little while yet to come.
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