LIBOR Latest

Today (9/7/12) in Britain the scandal over Barclays Bank's rigging of the London Inter-Bank Offered Rate (LIBOR) has continued. Paul Tucker a senior official at the Bank of England (BoE) has appeared in front of a Parliamentary select committee. The main area of questioning related to a conversation between Mr Tucker and Bob Diamond the then head of Barclay investment division in October 2008 in which Mr Diamond claims the BoE gave Barclays permission to falsely lower the banks LIBOR submissions. The Conservative Party chair of the committee was particularly interested in getting Mr Tucker to name members of the previous Labour government who may have given him permission to have that conversation with Barclays.

To my mind that was missing the point to the point of deliberate misdirection. What I think is more important is why Barclays submissions were so high in the month prior to the conversation with the BoE. Although Barclays LIBOR submissions in September '08 were so high they were excluded from the figures used to set the actual LIBOR they raised the bar for other banks and created the conditions that saw LIBOR almost double from 2.5% to almost 5%. It was this September spike that locked Halifax Bank Of Scotland (HBOS) out of the LIBOR market which along with some highly suspicious short selling caused HBOS to be taken over by Lloyds-TSB even though the bank wasn't particularly exposed to the sub-prime crisis.
Sent from my BlackBerry® smartphone on O2