BBA LIBOR: a vastly bigger scandal than we knew
For the first time since the massive Libor scandal broke, an individual has surfaced who seems to have a serious investigative handle on what was going on. The evidence supplied by the Reuters journalist Carrick Mollenkamp today, if it proves to be correct, gives the lie to any sense that in some way the fiddling of the BBA Libor was some secret, hole in the corner, operation.
Mollenkamp has toiled round the Square Mile for several different financial news operations in the recent past. Throughout he has tracked the Libor and watched the way in which, he claims, ALL the big banks fiddled the rates the posted to it. The Libor is presided over by the British Bankers Association. Angela Knight – the BBA’s outgoing CEO told me that the BBA didn’t really handle the Libor – the work was ‘outsourced’ to Thomson Reuters. But the facts reside in the reality that Ms Knight’s office was constantly badgering many of us reporting these things to call the Libor by what they regarded as its ‘proper’ name – the BBA Libor.
The BBA was indeed in charge of setting the Libor interest rate upon which so many of our own commercial life depends – mortgage rates, loan rates, and the rest.
Little can the last Labour government have known as they and the then Tory opposition called for ‘light touch regulation’, quite how light it was. It was so light, when it came to the BBA Libor, that it was non-existent.
There are vast questions being thrown up by the minute which are in danger of being eclipsed by the attention focusing on the naming of names. Marcus Agius, according to one senior Barclays source to whom I have spoken, was a ‘by-stander’. His resignation is ‘flak to protect Bob (Diamond)‘.
Get past the names then and let’s look at this ‘light touch regulation’. Carrick Mollenkamp describes his life in the city, intersecting with traders and bankers alike. As they relaxed in bars around Canary Wharf, Mollenkamp concluded that the fiddling of the Libor was a standard and widespread practice.
If a Reuters journalist was picking this up – he says even BEFORE the financial meltdown of 2008 – how on earth was it missed by the regulators, the Bank of England, the Financial Services Authority, and the so-called ‘City fathers’ (the old Boys network around the stock exchange and other City institutions)?
Looked at in the cold light of this drab summer’s morning, it seems impossible that the regulators did not know and simply went along with the Libor fiddling simply to save institutions that even by 2008 were far too big to fail. That’s a bold claim. But it is the claim that needs to be addressed. And not just by the Financial Services Authority, which clearly can’t investigate its own track-record.
There is a strong suspicion that we are only where we are today because the US authorities took the view that what was going on amounted to criminal activity. They moved to prosecute Barclays as a test case – Barclays did their multi-million dollar deal on the US fines, at the same time, it’s said, informing on the other banks they knew to be involved.
There is a vast amount more slurry to come – watch our Channel 4 space!
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