The Analysis : The Libor Scandal

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The LIBOR Scandal Analysis Final Exam Essay - Ryan Sylvia The LIBOR or London inter-bank offered rate scandal involved the manipulation of one of the most important figures in the finance world LIBOR. LIBOR is the average interest rate derived from rates submitted by the major banks in London and is used in determining the prices that both individuals and business will pay for loans. The rate itself is indicative of the interest rates that a bank will pay to borrow from another bank. The LIBOR scandal surrounded the intentional understatement of these interest rates, which collectively contributed to keeping the LIBOR rate low. Not only did the scandal impact financial lending it also caused British financial institutions to appear to…show more content…
Indeed, the fundamental principle of self-discipline predates the securities laws. At its most basic level, self-regulation is the manner in which all firms self-police their own activities to ensure that they are meeting all fiduciary and other duties to their clients.” Clearly she supports the ideology of self-governance whereas opponents believe that a system of structured corporate governance is often powerless to contend with the inherent risk of fraud or intentional lack of judgment. The LIBOR scandal exposed flaws in in the theory of self-governance but it was also a revelation about what happens when multiple internal failures occur throughout the system. In this case, the failures can be classified as as misreporting and summarized into two categories. First, misreporting for personal gain and second is misreporting for corporate interests. “Misreporting for personal benefit is clearly a breach of the fiduciary duty of loyalty of the managers involved, but misreporting, ostensibly to protect corporate interests, is a breach of the emerging fiduciary duty of good faith.4” One of the strongest arguments against market self-regulation came from American macroeconomist, Hyman Minsky. Minsky predicted almost exactly the kind of meltdown that happened in 2008 and while he believed in capitalism, he also
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