A definition of what LIBOR is: “a benchmark rate that some of the world’s leading banks charge each other for short-term loans. It stands for Intercontinental Exchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world.” Definition by investopedia.com.
Here’s a short video presentation on what LIBOR is, made by CNBC and lectured by Salman Kahn, Libor:CNBC Explains.
Now for some details of the scandal, first a quote from the New York Times newspaper:
“…Now, the regulatory void has spawned another round of criminal accusations and multibillion-dollar penalties — enough to wipe out nearly all the revenue that major investment banks generated from their foreign exchange businesses last year.
On Wednesday, four large global banks —Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland — pleaded guilty to a series of federal crimes over a scheme to manipulate the value of the world’s currencies…” Michael Corkery and Ben Protess, NYTimes, 5/20/2015
Well, just when we thought it was “safe to go back into the pool”, the LIBOR scandal started to unfold. I can’t pinpoint when the popular media “got the scent” and the LIBOR story “broke” to the general public but I’m offering three (3) timelines for your perusal.
Reuters timeline for the LIBOR scandal. Reuters timeline
ProPublica’s timeline for the LIBOR scandal. ProPublica timeline
New York Time’s timeline for the LIBOR scandal. New York Times timeline
Here’s the link to the complete article by Corkery and Protess of the New York Times. Title of their article is Rigging of Foreign Exchange Market Makes Felons of Top Banks. Corkery and Protess article
To close out this blog item, here’s PBS and Frontline’s documentary entitled The Untouchables. It was produced in January of year 2013. The Untouchables