Timeline: Barclays' widening Libor-fixing scandal

[dipsydoodle]

As early as 2005 there was evidence Barclays had tried to manipulate dollar Libor and Euribor (the euro 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.

One Barclays trader told a trader from another bank in relation to three-month dollar Libor: "duuuude... what's up with ur guys 34.5 3m fix... tell him to get it up!"

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 Financial Services Authority (FSA).

http://www.bbc.co.uk/news/business-18671255

To get even close to grasping this situation you need to read the whole article.

This is what LIBOR actually is :

Libor measures the average rate that banks have to pay to borrow from their rivals for a specific period of time - be it a few weeks, months or up to a year.

It is calculated on a daily basis by the British Bankers' Association from estimates submitted by the major international banks based in London of the interest rate they must pay in order to borrow cash from other banks.

The rate each bank has to pay is in part a reflection of their rivals' perception of its financial strength, effectively how much it is trusted.

Every day 16 banks submit the interest rate that they are charged to borrow money.

The four highest rates and the four lowest rates are ignored. The average of the eight remaining rates makes up the Libor rate.

http://www.bbc.co.uk/news/business-18759479

[Kolesar]

1. Banks that were facing bankruptcy would be forced to pay higher interest rates

...by lenders who knew that they were taking a big risk by lending to them. So those banks schemed to get the interest rates lowered.

That is how I understand the scandal from my reading yesterday. I wish I had gone to business school to understand finance and its terminology. The topic is quite obscure. I would rather be reading about how to grow broccoli.

[dipsydoodle]

2. There are oddities here

On an occasion which keeps getting mentioned Barclays were accused of keeping their figure too high.

The main beneficiaries of the rates being artificially lowered were probably those with variable rate Libor based mortages.

[jerseyjack]

4. The main beneficiaries were not mortgagees. The purpose of rigging the rates was for the banks to

get lower borrowing rates themselves.

[dipsydoodle]

5. In aggregate

mortgagees and those with Libor based loans would've have been the main beneficiaries.

The actual purpose of the antics of the banks was to make their balance sheets at that time appear to be stronger.

[dixiegrrrrl]

6. If banks were borrowing at ZERO interest from the Fed

why would they need to borrow at higher rates above zero from other banks?
As I understand things from what I have read, the Fed not only has been giving US banks free money but also European banks our money, at 0% interest, for over night or longer loans.

[xchrom]

3. Du rec. Nt