Barclays Fined For Role In Scandal

---

---

Barclays bank has been caught with its hand in the cookie jar and severely penalised for its role in a derivative scandal that most definitely involves many high street banks on both sides of the Atlantic.  Their reputation was tarnished yesterday (28 June) when the Financial Services Authority barrelled a two-hundred and ninety million pound fine for trying to rig the London Interbank Offered Rate (Libor) in its favour.  In a forty-four page document, the irregularities they found were dished out and have been seized upon by many media outlets.
 
For many who do not understand what Libor is, in laymen terms it is simply the rate at which investment rate transactions are priced.  Also worth bearing in mind is that they can include retail transactions on a gargantuan scale involving interest rate derivatives at the cost of hundreds of trillions of dollars.  This isn’t so much a shock for those entrenched in the financial world as traders have been batting on the same team for decades at the behest of their banking bosses and because of an exorbitant desire for greed that supersedes the need of the greater public.
 
Traders were caught trying to rig the rate no less than three hundred times between 2005 and 2007.  Emails read out in the report revealed how traders would do each other favours.  One email read “thanks for the help, you’re the big daddy” and another stated “time to pop open the Bollinger tonight”.  One was so bold and brazen he stated “who’s going to put my low fixing’s in?” These are just some of the quotations written amongst many reviled emails lauding between traders and investors who seem to forgotten that they are indeed breaking the law.
 
The man at the centre of this controversy is Bob Diamond, the Chief Executive at Barclays Capital at the time.  Many believe that this culture of gluttony occurred under his watch and that he should have his head placed under the guillotine.  An advocate for this is the Liberal Democrat Peer Lord Oakesshott.  Talking to the BBC, he said: “If he had a shred of decency he would resign from his position and if Barclays had any backbone they would sack him”.  To date nothing has happened thus far, though the report was only established earlier today and some intense pressure is being applied via the media and outspoken politicians like Lord Oakesshott.
 
In February of 2011, Bob Diamond was only pleading to British politicians not to punish banks for their involvement in the financial crisis bank in 2008.  He encouraged them to understand “risk-taking banks help the economy and private sectors thrive”.  While there is no knowledge that he was aware that low-level traders were breaking the law, many believe he was alert to such transactions.  Against the idea of regulations, the report released by the Financial Security Authority will only help reinforce the notion that much more regulations are required to help deter criminal traders from operating and breaking financial laws.  This seems like a script written similar to the Oliver Stone directed “Wall Street,” except such activities are happening in the capital.
 
In response to this debacle the bank itself announced it had reached an agreement with the Financial Services Authority, Commodity Future’s Trading Commission and the US department of Justice.  The ramifications of the case have not been fully felt as other banks have yet to be indicted on any serious charges.  Than again the likelihood is nothing will happen to the likes of Bob Diamond either.  But the seriousness of this report has shook up the banking world with Bob Diamond, Chris Lucas and Rich Ricci all waving their bonus entitlement for 2012.
 
What is likely to happen is Bob Diamond will deny that he had any inclination of what was going on.  A few low-level traders will be sacked but the culture will not likely change.  There will be calls for his sacking but Diamond is a man of influence and clout who will not be coerced out of his role.
 
The positive aspect of this report is, finally the Financial Services Authority illustrated some muscle and a little bit of integrity to take on the might of the banks.  For years they have gone unchallenged, but despite the fine being a drop in the ocean, a little bit of pressure will not go amiss.  This can be considered deterrence and one that should be followed up far more vigorously in order to try and create an economic system that is balanced, instead of it being rigged.