International Trade and Finance Assignment

LIBOR scandal

What is LIBOR?
LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate that
some of the worlds leading banks charge each other for short-term loans.
It stands for Inter Continental Exchange London Interbank Offered Rate
and serves as the first step to calculating interest rates on various loans
throughout the world. LIBOR is administered by the ICE Benchmark
Administration (IBA), and is based on five currencies: U.S. dollar (USD),
Euro (EUR), pound sterling (GBP), Japanese yen (JPY) and Swiss franc
(CHF), and serves seven different maturities: overnight, one week, and 1,
2, 3, 6 and 12 months. There are a total of 35 different LIBOR rates
(number of currencies x number of different maturities) each business
day. The most commonly quoted rate is the three-month U.S. dollar rate
(usually referred to as the current LIBOR rate).
ICE LIBOR was previously known as BBA LIBOR until February 1, 2014,
the date on which the ICE Benchmark Administration (IBA) took over the
Administration of LIBOR from The British Bankers Association (BBA), a
UK trade association responsible for banking and financial services.
LIBOR is the worlds most widely-used benchmark for short-term interest
rates. It serves as the primary indicator for the average rate at which
banks that contribute to the determination of LIBOR may obtain shortterm loans in the London interbank market.

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LIBOR's primary function is to serve as the benchmark reference rate for

debt instruments, including government and corporate bonds, mortgages,
student loans, credit cards; as well as derivatives such as currency and
interest swaps, among many other financial products.
LIBOR represents the lowest real-world cost of unsecured
funding in the London market.
LIBOR is also used as a barometer to measure the health of the banking
system and as a gauge of market expectation for future central bank
interest rates. It is the basis for settlement of interest rate contracts on
many of the world's major futures and options exchanges.
Why LIBOR came into existence?
LIBOR is equivalent to the federal funds rate, or the interest rate one
bank charges another for a loan. The advent of LIBOR can be traced to
1984, when the British Bankers Association (BBA) sought to add proper
trading terms to actively traded markets, such as foreign currency,
forward rate agreements and interest rate swaps. LIBOR rates were first
used in financial markets in 1986 after test runs were conducted in the
previous two years. Today, LIBOR has reached such stature that the rate
is published daily by the ICE at about 11:45am GMT.
It is used as the key point of reference for financial instruments, such as
futures contracts, the U.S. dollar, interest rate swaps and variable rate
mortgages. LIBOR takes on added significance in times of tight credit as
foreign banks yearn for U.S. dollars. This scenario usually sends LIBOR for
dollars soaring, which is generally a sign of imminent economic peril.
How is LIBOR calculated?
ICE Benchmark Administration maintains a reference panel of between 11
and 18 contributor banks for each currency calculated. IBA currently fixes
in the following five currencies:
(1)
(2)
(3)
(4)
(5)

CHF (Swiss Franc)

EUR (Euro)
GBP (Pound Sterling)
JPY (Japanese Yen)
USD (US Dollar)

The panel selects contributor banks based on

(1)
(2)
(3)

Market activity
Credit rating
Expertise

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Every contributor bank is asked to base their ICE LIBOR submissions on

the following question: At what rate could you borrow funds, were
you to do so by asking for and then accepting interbank offers in a
reasonable market size just prior to 11 am London time?
Therefore, the submissions are based upon the lowest perceived rate at
which a bank could go into the London interbank money market and
obtain funding in reasonable market size, for a given maturity and
currency. Reasonable market size is intentionally unquantified: it would
have to be constantly monitored and in the current conditions would have
to be changed very frequently. It would also vary between currencies and
maturities, leading to a considerable amount of confusion.
All ICE LIBOR rates are quoted as an annualised interest rate. This is a
market convention. For example, if an overnight Pound Sterling rate from
a contributor bank is given as 2.00000%, this does not indicate that a
contributing bank would expect to pay 2% interest on the value of an
overnight loan. Instead, it means that it would expect to pay 2% divided
by 365.
Every ICE LIBOR rate is calculated using a trimmed arithmetic mean.
Once each submission is received, they are ranked in descending order
and then the highest and lowest 25% of submissions are excluded. This
trimming of the top and bottom quartiles allows for the exclusion of
outliers from the final calculation.
Calculation method
NUMBER OF
CONTRIBUTORS

METHODOLOGY
(Values excluded)

NUMBER OF CONTRIBUTOR
RATES AVERAGED

18 Contributors

Top 4 highest rates,

tail 4 lowest rates

10

17 Contributors

Top 4 highest rates,

tail 4 lowest rates

16 Contributors

Top 4 highest rates,

tail 4 lowest rates

15 Contributors

Top 4 highest rates,

tail 4 lowest rates

14 Contributors

Top 3 highest rates,

tail 3 lowest rates

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13 Contributors

Top 3 highest rates,

tail 3 lowest rates

12 Contributors

Top 3 highest rates,

tail 3 lowest rates

11 Contributors

Top 3 highest rates,

tail 3 lowest rates

Thomson Reuters, a financial data and news provider, acts as the LIBOR
collection agent. Each business day, it collects the submissions from the
banks Once collected, the collection agent discards the highest and lowest
25% of submissions and averages the remaining submissions, in order to
prevent individual banks from manipulating LIBOR. Importantly, banks
should not base submissions on the pricing of any derivative financial
instrument, but rather on the banks cash. Banks often tie derivatives
contracts to LIBOR, which creates an incentive for banks to submit false
rates to move LIBOR in their favor.

Panel Composition
BANK/CCY

USD

GBP

EUR

CHF

JPY

BANK OF TOKYO-MITSUBISHI UFJ LTD

LLOYDS TSB BANK PLC
BARCLAYS BANK PLC
BNP PARIBAS SA, LONDON BRANCH
CITIBANK N.A. (LONDON BRANCH)
CRDIT AGRICOLE CORPORATE &
INVESTMENT BANK
CREDIT SUISSE AG (LONDON BRANCH)
DEUTSCHE BANK AG (LONDON BRANCH)
HSBC BANK PLC
JPMORGAN CHASE BANK, N.A. LONDON
BRANCH
BANK OF AMERICA N.A. (LONDON
BRANCH)

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MIZUHO BANK, LTD.

RABOBANK INTL CCRB (COOPERATIEVE
CENTRALE RAIFFEISEN BOERENLEENBANK B.A)
ROYAL BANK OF CANADA
SANTANDER UK PLC
SOCIT GNRALE (LONDON BRANCH)
SUMITOMO MITSUI BANKING
CORPORATION EUROPE LIMITED
THE NORINCHUKIN BANK
THE ROYAL BANK OF SCOTLAND PLC
UBS AG

The Scandal
Before the scandal came to light LIBOR was under the control of The
British Bankers Association (BBA), a UK trade association responsible
for banking and financial services, which created and was overseeing
LIBOR. The British government was not regulating LIBOR. The Foreign
Exchange and Money Markets Committee (FXMM) established the
guidelines for calculating LIBOR and selected banks to serve on panels.
The FXMM has been criticized for its lack of transparency. It came into
light that FXMM is composed of highly experienced market participants,
including officials from contributing banks.

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Barclays
The Barclays investigation revealed two types of LIBOR manipulation. The
first involved requests to manipulate rates for the benefit of derivatives
traders. The second involved submitting false rates during the financial
crisis to protect Barclayss reputation.
1. Requests to manipulate rates for the benefit of derivatives
traders
Between 2005 and 2009, Barclays derivatives traders attempted to
manipulate LIBOR by requesting that submitters submit rates that
would benefit the traders trading positions, instead of rates that
conformed to the LIBOR definition. Submitters complied with at
least 70% of requests to submit false rates made by Barclays
traders from January 3, 2006 to August 6, 2007. Additionally,
Barclays sent and complied with interbank requests for LIBOR
manipulation. While Barclayss manipulation of LIBOR rates
internally raises concerns, the interbank collusion poses a greater
threat since the likelihood of successfully manipulating LIBOR
increases when part of a coordinated effort. Further, former
Barclays employees made at least twelve of the requests to submit
false rates. In all, Barclays traders colluded with external traders to
manipulate LIBOR rates on days on which Derivatives Traders
stood to benefit. While the impact of Barclayss manipulation
remains unclear, at the very least the manipulation benefitted
Barclays traders by reducing their losses, to the detriment of
counterparties.
2. Manipulation of rates during the financial crisis to Protect
Barclayss Reputation
Barclays also attempted to manipulate LIBOR by submitting
dishonestly low estimates of bank borrowing costs leading up to
and during the financial crisis in 2008. Since LIBOR represents the
cost at which banks can borrow funds, some market participants
interpret LIBOR submissions as reflective of financial health. Thus,
higher submissions may signal that the bank is experiencing
liquidity problems. From August 2007 to January 2009, Barclays
submitted low LIBOR estimates to quell concerns about Barclayss
financial health. Further, after receiving negative publicity, Barclays
management ordered submitters to submit estimates that fell within
the top 25% but were not high enough to draw attention to the
bank. During this time, some Barclays employees attempted to
alert the BBA and FSA that banks were submitting dishonestly low
rates. Moreover, some regulators apparently knew of and condoned
the LIBOR manipulation. On October 29, 2008, a Barclays manager
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spoke with Bank of England (BOE) executive Paul Tucker and

Barclays managers subsequently interpreted the conversation as an
instruction by the BOE to lower Barclayss LIBOR submissions.
Further, Timothy Geithner, then president of the New York Federal
Reserve, contacted BOE in June 2008 expressing concerns about the
reliability of LIBOR and presenting his suggestions for improving the
rate-setting process.
Barclays was fined in June last year and was found by US and UK
regulators to have manipulated or fixed its rate submissions and fined a
total of 290 million. The fine from the UK regulator made up 59.5
million and the rest was fines from the US Department of Justice (DoJ)
and the US Commodity Futures Trading Commission (CFTC).
Barclays has since revealed that the bank's chief operating officer Jerry
del Missier was the most senior member of staff to give the order to rig
rates.
The bank released a note written by Diamond detailing a phone call he
had received from Paul Tucker, the deputy governor of the Bank, during
which Tucker said he'd 'received calls from a number of senior figures
within Whitehall to question why Barclays was always towards the top end
of the Libor pricing.
Diamond then relayed this conversation to del Missier who interpreted it
as an instruction to lower the rate and therefore passed down a direction
to that effect to rate submitters. Diamond, however, maintains he did not
believe it was an instruction, and said he knew nothing of what was being
done until the FSA released its findings in June.

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UBS
UBS received the FSAs largest ever fine of 160 million in December but
this was just part of the 940 million it had to pay out to the DoJ and
CTFC and the Swiss Financial Market Supervisory Authority,
The FSA found UBS traders routinely made requests to those responsible
for submitting Libor rates to change the rates in order to make a profit.
UBS also allowed traders to make the submissions to the Libor panel.
UBS traders colluded with brokers to influence Japanese Yen Libor
submissions and paid the brokers corrupt brokerage payments as a
thank-you. It found at least 2,000 documented requests for inappropriate
Libor submissions but it cannot judge the number of requests made that
werent written down.
UBS traders openly discussed Libor manipulation in internal open chat
forums and in group emails.

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UBS chief executive Sergio Ermotti said the bank regretted this unethical
behaviour and that no amount of profit is more important than the
reputation of this firm.
The Royal Bank of Scotland
The Royal Bank of Scotland has been fined a total of 390 million, 87.5
million of which is made up by the FSAs penalty. The rest are DoJ and
CFTC fines.
RBS has been found wanting in much the same areas as UBS. It made
Libor submissions that benefited the banks investment arm and allowed
traders to make Libor submissions to benefit themselves.
It also made Libor submissions that boosted the profit and loss accounts
of its money market trading.
On top of the widespread misconduct, RBS failed to put proper controls in
place to prevent Libor manipulation but told the regulator that it had. In
fact some of the Libor failings werent dealt with until March 2012.
Stephen Hester, RBS group chief executive, said the banks commitment
to change was absolute but it is interesting that RBS chairman Philip
Hamilton noted a need to fix the culture of the banking industry before
he addressed RBS own failings.
What did the regulators do?
Regulators handed out fines to three of the major Libor-rigging players,
and continued its investigation into all the other 16 banks suspected to be
involved in the LIBOR scandal.
On September 28, 2012, head of the regulator Martin Wheatley outlined a
10-point plan to overhaul how Libor operates. Reforms included
regulations, reform of the submission process, new guidelines for
contributing banks, making rate rigging a criminal offence and stripping
the BBAs role in compiling Libor rates and replacing it with a new body.
Ultimately, the Review concluded LIBOR should be reformed, not
replaced.
Wheatley also wanted to streamline the number of Libor rates it calculates
to just 20 from 150 and make more banks submit rates.
The Wheatley reforms were followed up by an announcement in
November from the BBA launching a consultation paper which
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recommended a phased-in approach to streamlining Libor in the early

months of 2013.
The Wheatley Review
While it remained unclear exactly what is needed to reform LIBOR
and restore trust in the benchmark, Wheatley released the review,
on September 28, 2012, outlining his recommendations.
1. Regulation of LIBOR
First, the Review recommended that administering LIBOR and
LIBOR submissions be regulated under the Financial Services and
Market Act 2000 (FSMA) Order 2001 because the incentives to
tamper with LIBOR submissions result in frequent misconduct.
LIBOR regulation will encompass LIBOR submissions, calculations,
and publication. The Review suggested regulation of LIBOR is
needed to give the FSA the power to penalize violating businesses,
providing a powerful, but currently lacking, incentive for
compliance. The FSA will designate submission and administration
managers as controlled functions to promote individual
accountability and ensure that only fit and proper individuals,
unlike under the current LIBOR framework, fill these management
positions. Additionally, the FSA will have the power to fine
institutions and individuals that violate LIBOR regulations, which will
increase confidence in the LIBOR framework because violations will
not be left unseen or unpunished.
2. Strengthening Institutions and Governance of LIBOR
The Review identified three weaknesses in the existing LIBOR
framework:
(1) Inadequate independence of governance structures;
(2) Insufficient oversight
(3) Limited transparency and accountability.
Significantly, the Review concluded the BBA should cease its
involvement in the LIBOR process because its close ties with
contributor banks hinder its ability to credibly administer the
benchmark. The BBA agreed to relinquish responsibility for
LIBOR based on the Reviews recommendation, and it has
announced it will immediately begin the process of selecting a
private organization to administer LIBOR. The new LIBOR
administrator should exhibit interests distinct from contributor
banks. In particular, the administrator should develop specific
ideas for oversight practices and for processes promoting
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transparency and accountability, and focus on fair and nondiscriminatory access to LIBOR. Further, the administrator must
examine and analyse all LIBOR submissions for manipulation and
refer irregular submissions to the independent oversight
committee (Committee"). Moreover, the administrator will be
responsible for developing standards for banks seeking to join
panels and the protocol for LIBOR submissions. The reformed
framework also requires the creation of an independent oversight
committee to restore credibility to the submission process and
ensure representation of non-panel banks in the oversight
process. The Committee will define LIBOR, analyse submissions,
and create a code of conduct for all parties involved in the LIBOR
setting process. Unlike the FXMM, the Committee will increase
transparency by publishing the names of members, declarations
of conflicts of interest, and minutes of meetings. A code of
conduct, which the Committee and administrator will create, will
formalize the submission process and establish internal
procedures to prevent LIBOR manipulation. The code will further
require that contributing banks keep accurate and accessible
records of transactions in inter-bank deposits and that
institutions utilize external audits to increase the credibility of
submissions.
3. Immediate Reforms to LIBOR
Third, the Review suggested immediate reforms to LIBOR
including delaying the publication of rates, reducing the number
of indexes published, and increasing panel sizes. Since LIBOR
continues to function, these immediate measures serve as
temporary solutions until the new administrator and UK
regulators
can
implement
the
Reviews
long
term
recommendations for comprehensive LIBOR reform. While the
BBA published LIBOR daily to foster transparency and
accountability, in practice it incentivized banks to submit false
rates. In order to reduce the banks ability to predict how
submissions will affect the LIBOR rate, the Review recommended
that publication of submissions be immediately delayed for at
least 3 months. Further, since submissions must be supported
by transaction data when possible, some of the 150 LIBOR
indexes will no longer be published. The Review recommended
that over the next year, the publication of indexes lacking
transaction data cease and the administrator reduce the total
number of indexes published to twenty. Additionally, the review
emphasized that maintaining relatively large panels increases the
overall accuracy and credibility of LIBOR, because large panels
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reduce the impact any one bank can have on the LIBOR rate and
increase the representativeness of LIBOR. Bank participation
on LIBOR panels is essential because otherwise, LIBOR would
eventually fail, leading to major implications for banks,
institutions and financial markets.
How does LIBOR effect common man?
The rates banks pay to borrow money affect how much they charge
customers for loans and mortgages. When costs for the banks go up, the
price customers pay also goes up. It could be argued, therefore, that any
manipulation of inter-banking lending rates will affect customers.
There are also roughly 250,000 borrowers with mortgages directly linked
to Libor, explained Ray Boulger, of mortgage lender John Charcol,
although most would have been taken out by buy-to-let, sub-prime and
commercial borrowers.
As this type of mortgage is usually linked to the three monthly Libor rates
it would therefore have likely been affected, he said.
However, before the credit crisis rates were also only manipulated very
slightly, otherwise it would have been obvious, and were not altered
every day. During the crisis, meanwhile, Barclays manipulated the rate
lower to appear more creditworthy so any impact then would have
actually been beneficial to mortgage borrowers.
But, if mortgage borrowers benefited, its possible that institutional
investors which placed money in Libor-linked products could have lost
out, impacting savers who had money invested in a pension funds, for
example.
The problem is that the exact amount of detriment the banks actions had
will be difficult to determine and so could result in a legal nightmare for
anyone trying to sue.

Why the Libor revelations matter?

Manipulating something so fundamental to the banking industry is quite
frankly a new low. And what makes matters worse is that its not the only
scandal the banks are involved in four major high street banks are
involved in mis-selling interest rate protection products to small and
medium sized businesses and lets not overlook the huge payment
protection insurance mis-selling issue.

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Timeline LIBOR scandal

2005
As early as 2005 there was evidence Barclays had tried to manipulate
dollar Libor and Euribor (the eurozone's equivalent of Libor) rates at the
request of its derivatives traders and other banks.
Misconduct was widespread, involving staff in New York, London and
Tokyo as well as external traders.
Between January 2005 and June 2009, Barclays derivatives traders
made a total of 257 requests to fix Libor and Euribor rates, according to a
report by the FSA.
One Barclays trader told a trader from another bank in relation to threemonth dollar Libor: "duuuude... what's up with ur guys 34.5 3m fix... tell
him to get it up!".
2007
At the onset of the financial crisis in September 2007 with the collapse
of Northern Rock, liquidity concerns drew public scrutiny towards Libor.
Barclays manipulated Libor submissions to give a healthier picture of the
bank's credit quality and its ability to raise funds. A lower submission
would deflect concerns it had problems borrowing cash from the markets.
Barclays' Libor submissions were at the higher end of the range of
contributing banks, and prompted media speculation about the true
picture of the bank's risk and credit profile.
Senior treasury managers instructed submitters to reduce Libor to avoid
negative publicity, saying Barclays should not "stick its head above the
parapet", according to the FSA report.
From as early as 28 August, the New York Fed said it had received
mass-distribution emails that suggested that Libor submissions were
being set unrealistically low by the banks.
On 28 November, a senior submitter at Barclays wrote in an internal
email that "Libors are not reflecting the true cost of money", according to
the FSA.
In December, a Barclays compliance officer contacted the UK banking
lobby group British Bankers' Association (BBA) and the FSA and described
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"problematic actions" by other banks, saying they appeared to be

understating their Libor submissions, according to US regulator the
Commodity Futures Trading Commission (CFTC).
On 6 December, a Barclays compliance officer contacted the FSA,
according to the FSA report, to express concern about the Libor rates
being submitted by other banks, but did not inform the FSA that its own
submissions were incorrect, instead saying that they were "within a
reasonable range".
The FSA said that the same compliance officer then told Barclays senior
management that he told the FSA "we have consistently been the highest
(or one of the two highest) rate provider in recent weeks, but we're
justifiably reluctant to go higher given our recent media experience", and
that the FSA "agreed that the approach we've been adopting seems
sensible in the circumstances".
In early December, the CFTC said that the Barclays employee
responsible for submitting the bank's dollar Libor rates contacted it to
complain that Barclays was not setting "honest" rates.
The employee emailed his supervisor about his concerns, saying: "My
worry is that we (both Barclays and the contributor banle panel) are being
seen to be contributing patently false rates.
"We are therefore being dishonest by definition and are at risk of
damaging our reputation in the market and with the regulators. Can we
discuss urgently please?"
On 6 December a Barclays compliance officer contacted the FSA about
concerns over the levels that other banks were setting their US Libor rate.
This was made after a submitter flagged to compliance his concern about
mis-reporting the rate. Compliance informed the FSA that "we have
consistently been the highest (or one of the two highest) rate provider in
recent weeks, but we're justifiably reluctant to go higher given our recent
media experience".
He also reported that the FSA "agreed that the approach we've been
adopting seems sensible in the circumstances, so I suggest we maintain
status quo for now".
In a phone call on 17 December a Barclays employee told the New York
Fed that the Libor rate was being fixed at a level that was unrealistically
low.
2008
On 11 April a New York Fed official queried a Barclays employee in detail
as to the extent of problems with Libor reporting. The Barclays employee
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explained that Barclays was underreporting its rate to avoid the stigma
associated with being an outlier with respect to its Libor submissions,
relative to other participating banks.
On 16 April, the Wall Street Journal published a report that questioned
the integrity of Libor.
Around this time, according to the CFTC, a senior Barclays treasury
manager informed the BBA in a phone call that Barclays had not been
reporting accurately. But he defended the bank, saying it was not the
worst offender: "We're clean, but we're dirty-clean, rather than cleanclean."
"No one's clean-clean," the BBA representative responded.
According to the FSA, following the Wall Street Journal report, Barclays
received communications from the BBA expressing concern about the
accuracy of its Libor submissions. The BBA said if the media reports were
true, it was unacceptable.
On 17 April, a manager made comments in a call to the FSA that
Barclays had been understating its Libor submissions: "We did stick our
head above the parapet last year, got it shot off, and put it back down
again. So, to the extent that, um, the Libors have been understated, are
we guilty of being part of the pack? You could say we are... Um, so I
would, I would sort of express us maybe as not clean clean, but clean in
principle."
In late April officials from the New York Federal Reserve Bank - which
oversees the banks in New York - met to determine what steps might be
taken to address the problems with Libor, and notified other US agencies.
On 6 May the New York Fed briefed senior officials from the US Treasury
in detail, and thereafter sent a further report on problems with Libor.
The New York Fed officials also met with BBA officials to express their
concerns and establish in greater depth the flaws in the Libor-setting
process.
On 29 May, Barclays agreed internally to tell the media that the bank had
always quoted accurate and fair Libors and had acted "in defiance of the
market" rather than submitting incorrect rates, according to the FSA.
In early June, Tim Geithner, who was the head of the New York Fed at
the time, sent Bank of England governor Sir Mervyn King, a list of
proposals to to try to tackle Libor's credibility problem.

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They included the need "to eliminate the incentive to misreport" by

protecting the identity of the banks that submitted the highest and lowest
rates.
Sir Mervyn and Mr Geithner, now US Treasury Secretary, had discussed
the matter at a central bankers' gathering a few days earlier.
Shortly afterwards, Sir Mervyn confirmed to Mr Geithner that he had
passed the New York Fed's recommendations onto the BBA soon
afterwards.
Spring: The BBA prepares a review of Libor, later described by the Bank
of England's deputy governor Paul Tucker as "tremendously important
because of the eroding credibility of Libor". The Bank wanted Libor to
reflect actual rates, not subjective submissions. Mr Tucker rang the banks
stressing the review should be carried out by senior representatives, not
the junior people normally sent to sit on the BBA committee.
On 10 June, the BBA published a consultation paper seeking comments
about proposals to modify Libor. "The BBA proposes to explore options for
avoiding the stigma whilst maintaining transparency," it said. Barclays
contributed comments but avoided mentioning its own rate submissions.
On 5 August, the BBA published a feedback statement on its consultation
paper, and concluded that the existing process for submissions would be
retained.
In September, following the collapse of Lehman Brothers, the Bank of
England had a conversation with a senior Barclays official, in which the
Bank raised questions about Barclays' liquidity position and its relatively
high Libor submissions.
On 13 October, the UK government announces plans to pump billions of
pounds of taxpayers' money into three major banks, effectively partnationalising Royal Bank of Scotland (RBS), Lloyds TSB and HBOS.
A week later, on 21 and 22 October, Paul Tucker and senior government
official Sir Jeremy Heywood discussed why Libor in the UK was not falling
as fast as in the US, despite government action. Sir Jeremy also asked
why Barclays' borrowing costs were so high. "A lot of speculation in the
market over what they are up to," he says in an email.
In subsequent evidence to the Treasury Select Committee Mr Tucker later
suggests there was widespread concern at this time that Barclays was
"next in line" for emergency government help. He was in regular contact
with Bob Diamond, emails show.
On 24 October a Barclays employee tells a New York Fed official in a
telephone call that the Libor rate is "absolute rubbish".
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LIBOR scandal

On 29 October Paul Tucker and Bob Diamond - head of Barclays'

investment bank at the time - speak on the phone. According to Mr
Diamond's account of the conversation, emailed to colleagues the next
day, Mr Tucker said senior Whitehall officials wanted to know why
Barclays was "always at the top end of Libor pricing".
According to the Barclays chief executive, Mr Tucker said the rates "did
not always need to be the case that we appeared as high as we have
recently". Mr Tucker later said that gave the "wrong impression" of their
conversation and said he did not encourage Barclays to manipulate its
Libor submissions.
Following this discussion with the Bank of England, Barclays instructed
Libor submitters to lower the rate to be "within the pack".
On 17 November,
rates should be set
procedures audited
circulated on 16 July

the BBA issued a draft document about how Libor

and required banks to have their rate submission
as part of compliance. The final paper would be
2009.

2009
On 2 November the BBA circulated guidelines for all contributor banks
on setting Libor rates in the same manner. Barclays made no changes to
its systems to take account of the BBA guidelines.
In December Barclays started to improve its systems and controls but
ignored the BBA's guidelines. Until 2009 the bank did not have a formal
Chinese wall between the derivatives team and the submitters.
2010
In June, Barclays circulated an email to submitters that set out
"fundamental rules" that required them, for example, to report to
compliance any attempts to influence Libor submissions either externally
or internally. It also prohibited communication with external traders "that
could be seen as an attempt to agree on or impact Libor levels".
2011
In late 2011, Royal Bank of Scotland sacked four people for their alleged
roles in the Libor-fixing scandal.
2012
On 27 June, Barclays admitted to misconduct. The UK's FSA imposed a
59.5m penalty. The US Department of Justice and the Commodity
Futures Trading Commission (CFTC) imposed fines worth 102m and
128m respectively, forcing Barclays to pay a total of around 290m.

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On 29 June, chief executive Bob Diamond said he would attend a

Commons Treasury Select Committee and that the bank would co-operate
with authorities. However, he insisted he would not resign.
The same day, Bank of England governor Sir Mervyn King called for a
"cultural change", adding: "The idea that one can base the future
calculation of Libor on the idea that 'my word is my Libor' is now dead."
He said implementing the Vickers banking reforms was the most
important first step, but ruled out a Leveson-style inquiry into the banks.
On 2 July, Barclays chairman Marcus Agius resigned and also tendered
his resignation as chairman of the BBA. Mr Diamond said in a letter to
staff that he would "get to the bottom" of what happened.
Prime Minister David Cameron announced a parliamentary review of the
banking sector, to be headed by the chairman of the Treasury Select
Committee, Andrew Tyrie. The review should ensure that the UK had the
"toughest and most transparent rules of any major financial sector", Mr
Cameron said.
On 3 July, Barclays chief executive Bob Diamond resigned, saying that
the external pressure on the bank risked "damaging the franchise".
He was followed by Barclays chief operating officer Jerry del Missier, who
resigned the same day.
On 4 July, Mr Diamond faced a three-hour grilling from MPs on the
Treasury Committee over the scandal, during which he described the
behaviour of those responsible as "reprehensible" and said it had made
him physically ill. The Committee subsequently accused him of giving
evidence that fell short of its expected standards.
On 5 July, credit rating agency Moody's lowered its rating outlook on
Barclays from stable to negative.
On 6 July, the Serious Fraud Office launched a criminal investigation into
Libor manipulation.
Deputy governor of the Bank of England Paul Tucker gave evidence to the
Treasury on 9 July, insisting he had not leant on Barclays to lower its
submissions, nor had he been asked to do so by the government.
On 16 July, Barclays chief operating officer Jerry del Missier told MPs he
was instructed by Diamond to lower the bank's Libor submissions. He also
told them he believed the Bank of England alone instructed Barclays to
lower them.

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LIBOR scandal

On 17 July, US Federal Reserve chairman Ben Bernanke told a Senate

committee that the Libor system was "structurally flawed" said that he
still did not have full confidence in the system.
Earlier, the governor of the Bank of England, Sir Mervyn King, told the
Treasury Committee that UK authorities had been worried about senior
management at Barclays, even before the recent Libor scandal broke. Sir
Mervyn said Barclays had sailed "close to the wind" too often.
On 31 July, Deutsche Bank confirmed that a "limited number" of staff
were involved in the Libor rate-rigging scandal. However, it said an
internal inquiry had cleared senior management of taking part.
On 10 August, the FSA published its initial findings on what needs to be
done to reform the Libor rate-setting system. The FSA's managing
director, Martin Wheatley, said trust in Libor "needs to be repaired" and
that the current system was no longer "viable".
On 16 August, it was announced that seven banks including Barclays,
HSBC and RBS are to face legal questioning in the US. The other banks to
receive the subpoenas from the attorney generals of New York and
Connecticut were Citigroup, Deutsche Bank, JPMorgan and UBS.
On 18 August, the Treasury Committee published its report into the
Libor rate-fixing scandal. The MPs blamed bank bosses for "disgraceful"
behavior. They demanded changes including higher fines for firms that
failed to co-operate with regulators, examination of gaps in criminal law,
and a much stronger governance framework at the Bank of England. The
committee also criticised the evidence of former Barclays boss Bob
Diamond, saying it had been "highly selective". In response, he said he
had "answered every question that was put to me truthfully, candidly and
based on information available to me".
On 25 September, the British Bankers' Association (BBA), the
organisation that sets the Libor rate, said it would accept losing the role.
Its statement came ahead of the FSA's final report on how to reform
Libor, due to be published on 28 September.
On 28 September, the FSA confirmed that the BBA would no longer
administer Libor, and would be replaced by a data provider (an
organisation such as Bloomberg or Reuters) or a regulated exchange. The
report also said that the Libor system was broken and suggested its
complete overhaul, including criminal prosecutions for those who try to
manipulate it. The regulator also suggested basing Libor calculations on
actual rates being used, rather than estimates currently provided by
banks.

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LIBOR scandal

On 11 December, the UK's Serious Fraud Office said three men had been
arrested in connection with its continuing investigations into Libor.
On 19 December, Swiss bank UBS is fined a total of $1.5bn (940m) by
US, UK and Swiss regulators for attempting to manipulate Libor. It agrees
to pay $1.2bn in combined fines to the US Department of Justice and the
Commodities Futures Trading Commission, 160m to the UK's Financial
Services Authority, and 59m Swiss Francs to the Swiss Financial Market
Supervisory Authority.
2013
On 10 January, the BBC's business editor, Robert Peston, discloses that
RBS is in talks with UK and US regulators over the size of fines to settle
the Libor investigation. He also warns that the resignation of a senior
executive was possible as part of a settlement.
A week later, on 17 January, the new chief of Barclays, Antony Jenkins,
tells staff to sign up to a new code of conduct - or leave the firm - as part
of an attempt to ensure that scandals such as Libor-fixing never happen
again.
On 25 January, a judge refuses a request from 104 senior Barclays staff
for anonymity during a court case. Guardian Care Homes had accused the
bank of mis-selling it an interest rate hedging product linked to Libor.
On 31 January, Deutsche Bank tells investors that it may face lawsuits
related to the manipulation of Libor, as well as other recent scandals.
Therefore, the bank said, it was setting aside 1bn euros to cover potential
litigation.
Amid speculation that RBS was close to a Libor settlement, on 2 February
the Chancellor of the Exchequer George Osborne says that any fines
imposed on the bank should be met by bankers themselves, not
taxpayers.
ICE Benchmark Administration Limited (IBA) was established in 2013 in
response to the increased oversight of benchmarks. As an authorised
benchmark administrator, IBAs aim is to return credibility, trust and
integrity to benchmarks, by combining strong regulatory and governance
frameworks with market-leading validation techniques and in-house
technology solution.
In July 2013, the Hogg Tendering Advisory Committee, an independent
committee set up by the UK government, selected IBA as new the new
administrator for the London Interbank Offered Rate (LIBOR).
2014

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LIBOR scandal

The transfer of the administration of LIBOR from BBA LIBOR to IBA was
completed on February 1, 2014, following authorisation by the Financial
Conduct Authority (FCA).
In April 2014, following an extensive selection process managed by the
International Swaps and Derivatives Association (ISDA), IBA was
appointed as the new administrator for ISDAFIX, with effect from August
1, 2014.
IBA has been working to enhance the governance and methodology of
LIBOR and ISDAFIX

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