All the latest news, reviews, pictures and video on culture, the arts and entertainment.The rotten heart of finance. THE most memorable incidents in earth- changing events are sometimes the most banal. In the rapidly spreading scandal of LIBOR (the London inter- bank offered rate) it is the very everydayness with which bank traders set about manipulating the most important figure in finance. They joked, or offered small favours. I owe you big time! One trader posted diary notes to himself so that he wouldn't forget to fiddle the numbers the next week. The number that the traders were toying with determines the prices that people and corporations around the world pay for loans or receive for their savings. It is used as a benchmark to set payments on about $8. The number determines the global flow of billions of dollars each year. Yet it turns out to have been flawed. Over the past week damning evidence has emerged, in documents detailing a settlement between Barclays and regulators in America and Britain, that employees at the bank and at several other unnamed banks tried to rig the number time and again over a period of at least five years. And worse is likely to emerge. Investigations by regulators in several countries, including Canada, America, Japan, the EU, Switzerland and Britain, are looking into allegations that LIBOR and similar rates were rigged by large numbers of banks. Corporations and lawyers, too, are examining whether they can sue Barclays or other banks for harm they have suffered. That could cost the banking industry tens of billions of dollars. The scandal also corrodes further what little remains of public trust in banks and those who run them. Like many of the City's ways, LIBOR is something of an anachronism, a throwback to a time when many bankers within the Square Mile knew one another and when trust was more important than contract. For LIBOR, a borrowing rate is set daily by a panel of banks for ten currencies and for 1. The most important of these, three- month dollar LIBOR, is supposed to indicate what a bank would pay to borrow dollars for three months from other banks at 1. The dollar rate is fixed each day by taking estimates from a panel, currently comprising 1. The top four and bottom four estimates are then discarded, and LIBOR is the average of those left. A Scandal in Bohemia c Pearson Education Limited 2008 A Scandal in Bohemia - Teacher’s notes 2 of 3 Teacher’s notes LEVEL 3 PENGUIN READERS. The fresh, sophisticated, and classic masterpiece, Citizen Kane (1941), is probably the world's most famous and highly-rated film, with its. Amazon.com: Notes on a Scandal: Cate Blanchett, Judi Dench, Andrew Simpson, Tom Georgeson, Michael Maloney, Joanna Scanlan, Shaun Parkes, Emma Kennedy, Syreeta Kumar. Yesterday the Internet got its first look at HowardCantour.com, a short film that marked the directorial deBeout of Shia LaBeouf, which had previously made the rounds. Bong Joon-ho's all-star eco-fantasy is a little bit of Spielberg, a little bit of Miyazaki and a whole lot of oddball 'Baby Driver' Review: Buckle Up For Edgar Wright. Jaws is a 1975 American thriller film directed by Steven Spielberg and based on Peter Benchley's 1974 novel of the same name. In the story, a giant man-eating great. The most contentious film at Cannes stars Nicole Kidman as Grace Kelly, but this biopic was botched badly. Find listings of daytime and primetime ABC TV shows, movies and specials. Get links to your favorite show pages. A veteran high school teacher befriends a younger art teacher, who is having an affair with one of her 15-year-old students. However, her intentions with this new. The submissions of all the participants are published, along with each day's LIBOR fix. In theory, LIBOR is supposed to be a pretty honest number because it is assumed, for a start, that banks play by the rules and give truthful estimates. The market is also sufficiently small that most banks are presumed to know what the others are doing. In reality, the system is rotten. First, it is based on banks' estimates, rather than the actual prices at which banks have lent to or borrowed from one another. Worse still, transparency in the mechanism of setting rates may well have exacerbated the tendency to lie, rather than suppressed it. Banks that were weak would not have wanted to signal that fact widely in markets by submitting honest estimates of the high price they would have to pay to borrow, if they could borrow at all. In the case of Barclays, two very different sorts of rate fiddling have emerged. The first sort, and the one that has raised the most ire, involved groups of derivatives traders at Barclays and several other unnamed banks trying to influence the final LIBOR fixing to increase profits (or reduce losses) on their derivative exposures. The sums involved might have been huge. Barclays was a leading trader of these sorts of derivatives, and even relatively small moves in the final value of LIBOR could have resulted in daily profits or losses worth millions of dollars. In 2. 00. 7, for instance, the loss (or gain) that Barclays stood to make from normal moves in interest rates over any given day was . In settlements with the Financial Services Authority (FSA) in Britain and America's Department of Justice, Barclays accepted that its traders had manipulated rates on hundreds of occasions. Risibly, Bob Diamond, its chief executive, who resigned on July 3rd as a result of the scandal (see article), retorted in a memo to staff that “on the majority of days, no requests were made at all” to manipulate the rate. This was rather like an adulterer saying that he was faithful on most days. Barclays has tried its best to present these incidents as the actions of a few rogue traders. Yet the brazenness with which employees on various Barclays trading floors colluded, both with one another and with traders from other banks, suggests that this sort of behaviour was, if not widespread, at least widely tolerated. Traders happily put in writing requests that were either illegal or, at the very least, morally questionable. In one instance a trader would regularly shout out to colleagues that he was trying to manipulate the rate to a particular level, to check whether they had any conflicting requests. The FSA has identified price- rigging dating back to 2. Traders acting at one bank, or even with the clubby co- operation of counterparts at rival banks, would have been able to move the final LIBOR rate by only one or two hundredths of a percentage point (or one to two basis points). For the decade or so before the financial crisis in 2. LIBOR traded in a relatively tight band with alternative market measures of funding costs. Moreover, this was a period in which banks and the global economy were awash with money, and borrowing costs for banks and companies were low.“Clean in principle”Yet a second sort of LIBOR- rigging has also emerged in the Barclays settlement. Barclays and, apparently, many other banks submitted dishonestly low estimates of bank borrowing costs over at least two years, including during the depths of the financial crisis. In terms of the scale of manipulation, this appears to have been far more egregious—at least in terms of the numbers. Almost all the banks in the LIBOR panels were submitting rates that may have been 3. That could create the biggest liabilities for the banks involved (although there is also a twist in this part of the story involving the regulators). As the financial crisis began in the middle of 2. Banks began to suffer losses on their holdings of toxic securities relating to American subprime mortgages. With unexploded bombs littering the banking system, banks were reluctant to lend to one another, leading to shortages of funding system- wide. This only intensified in late 2. Northern Rock, a British mortgage lender, experienced a bank run that started in the money markets. It soon had to be taken over by the state. In these febrile market conditions, with almost no interbank lending taking place, there were little real data to use as a basis when submitting LIBOR. Barclays maintains that it tried to post honest assessments in its LIBOR submissions, but found that it was constantly above the submissions of rival banks, including some that were unmistakably weaker. At the time, questions were asked about the financial health of Barclays because its LIBOR submissions were higher. Back then, Barclays insiders said they were posting numbers that were honest while others were fiddling theirs, citing examples of banks that were trying to get funding in money markets at rates that were 3. LIBOR. This version of events has turned out to be only partly true. In its settlement with regulators, Barclays owned up to massaging down its own LIBOR submissions so that they were more or less in line with those of their rivals. It instructed its money- markets team to submit numbers that were high enough to be in the top four, and thus discarded from the calculation, but not so high as to draw attention to the bank (see chart 1). In notes taken by Mr Diamond, then the head of the investment- banking division of Barclays, of a call with Paul Tucker, then a senior official at the Bo. E, Mr Diamond recorded what was interpreted by some in the bank as a nudge and a wink from the central bank to fudge the numbers (see article). The next day the Barclays submissions to LIBOR were lower. This could be a crucial part of the bank's defence. The allegation by Barclays that some banks seemed to be fiddling their data would appear to be supported by the data themselves. Over the period of the financial crisis, the estimates of its borrowing costs submitted by Barclays were generally among the top four in the LIBOR panel (see chart 2). Those consistently among the lowest four were some of the soundest banks in the world, with rock solid balance- sheets, such as JPMorgan Chase and HSBC. However, among banks regularly submitting much lower borrowing costs than Barclays were banks that subsequently lost the confidence of markets and had to be bailed out. In Britain these included Royal Bank of Scotland (RBS) and HBOS. The tobacco moment. Regulators around the world have woken up, however belatedly, to the possibility that these vital markets may have been rigged by a large number of banks. The list of institutions that have said they are either co- operating with investigations or being questioned includes many of the world's biggest banks. Among those that have disclosed their involvement are Citigroup, Deutsche Bank, HSBC, JPMorgan Chase, RBS and UBS. Court documents filed by Canada's Competition Bureau have also aired allegations by traders at one unnamed bank, which has applied for immunity, that it had tried to influence some LIBOR rates in co- operation with some employees of Citigroup, Deutsche Bank, HSBC, ICAP, JPMorgan Chase and RBS. It is not clear whether employees of these banks actually co- operated or, if they did, whether they succeeded in manipulating rates. Continental Europe is focusing on cartel effects rather than digging into the internal culture of banks. Separate investigations, by the European Commission and the Swiss authorities, focus on the possible effects of inter- bank rate manipulation on end users.
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