ADMN-2306 Sec: 825
Assignment #2
1) There were many individuals that benefitted from the manipulation of LIBOR. The Barclays derivatives traders, Money Market Desk, Bob Diamond and senior management and other banks all had some sort of gain from the LIBOR scandal.Let’s start with the people that had the most monetary gain - the Barclays derivative traders. It is said that LIBOR has been manipulated since the early 90s. Since then, there has been trillions of money made by derivate traders as they influence LIBOR. The traders communicated with the Money Market Desk, the individuals who submitted LIBOR rates, in order to manipulate the rate to their favour. In fact, the investigation found the derivate traders were not…show more content… The UK Financial Services Authority (FSA), Bank of England (BoE) and the Commodity Futures Trading Commission (CFTC) are bodies that were supposedly regulating LIBOR.
As part of the Financial Services and Markets Act 2000, the FSAs sole purpose are to meet their four objectives: maintain market confidence, enhance financial stability, protect the consumer and reduce financial crime. By not implementing rules, doing enough investigations and enforcing power, the FSA has failed to meet all these objectives. Trust was lost in the UK Financial system when the LIBOR scandal went public, banks revealed themselves to not be as financially stable as what they portrayed to be, a number of consumers got scalped by the manipulation and the LIBOR scandal occurred as one of the biggest financial crime that has yet to send individuals to jail. As a regulator that failed to meet all of its objectives, the FSA had a responsibility in the LIBOR scandal. Being the UK’s central bank, the BoE’s mandates were to provide monetary stability and financial stability. Even if this body does not oversee banks’ compliance with regulations, the scandal led to monetary and financial instability, which should concern the BoE. In fact, Diamond testifies against Paul Tucker, the deputy governor in charge of financial stability for the BoE. Diamond claims Tucker implied the LIBOR rate is high and should be lowered.