Barclays and the Libor Scanda, Case Study Example

The Libor scandal unfortunately caused some parties to be hurt. Many investors were hurt. Of course during the scandal, the perpetrators benefited from the money they gained from fixing the interest prices.

It turns out that in the summer of 2012 a group of traders and bankers conspired to fix these rates. There are numerous e-mail quotes with traders, brokers, and bankers promising to “scratch your back if you scratch mine.” Barclays and UBS of Switzerland were at the heart of this process, but as many as 16 banks were investigated. Barclays paid fines of $450 million, and UBS paid fines of $1.5 billion, making it one of the biggest in banking history. As a result, UBS fired 18 traders and the respected CEO of Barclays, Bob Diamond, resigned. The investigation could carry through 2014, and Morgan Stanley estimates that 11 banks could pay total fines up to $14 billion by the time the investigation is done. Evidently, the U.S. Federal Reserve suspected this bad behavior as early as 2007 and notified the British regulator, Financial Services Authority, but they didn’t deal with the warning in a timely fashion.

As a leader, if my competitors were cheating and I knew of it, I would immediately report them to the SEC so that they could open an investigation. It is not fair to myself as a leader, my business, and to the stakeholders if any of the firms within a market are cheating. It is ethically a leader’s responsibility to help prevent and report any knowledge of fraud being committed by any party. If a regulator is asking me to cheat, then I would advise them against it and report them if they keep pressuring me.

I would provide stronger safe guards against this kind of fraud. Revisions in regulations would be necessary, such as the Sarbanes Oxley Act of 2002 due to all of the accounting fraud that was going on at the time.

This Libor scandal is different from the subprime mortgage meltdown in such a way that the Libor scandal was intentional fraud, while the mortgage meltdown was triggered by a drastic fall in the prices of homes.

Works Cited

Gurdian. Libor: interbank lending rate explained. December 2012. July 2015 <http://www.theguardian.com/business/2012/dec/19/libor-interbank-lending-rate-explained>.

Investopedia. LIBOR. 2015. July 2015 <http://www.investopedia.com/terms/l/libor.asp>.