What Is Libor Scandal

...

have more than 800 trillion USD of total amount in the world and USD 360 trillion of which related to LIBOR rate. It means that the profits or loose of million USD may be caused by every 1 basis point in LIBOR rate movement. Besides, during the financial crisis, LIBOR has been considered a reflection to the health of the banking institutions. In other words, LIBOR is used as an indicator of a bank’s health, and the manipulation of the rate leading up to the 2007-2008 financial crisis made some financial institutions appear stronger than they actually were. In terms of the health barometer, central banks in some countries regarded the LIBOR rates the references to theirs monetary policy standards. We could imagine the entire financial system would suffer from the manipulation of such an important benchmark.

Dozens of US and European banks at present have taken the survey ranging from LIBOR market to EURIBOR market and TIBOR one. The United States, Britain, Germany, Switzerland, Japan and Canada and other countries have also intervened in the investigation. It is reported that besides Barclays, UBS, Deutsche Bank, Scotland, Royal Bank of Portland, HSBC, Citigroup, Bank of America, France Industrial Bank and other institutions involving in alleged manipulation of interest rates have been investigated by the authorities. Official documents showed that transactions among the traders in these institutions not only manually changed the LIBOR rate quote, but also suspiciously involved in manipulating the European Interbank Offered Rate (EURIBOR) and Tokyo Interbank Offered Rate (TIBOR). Statistical analysis indicated that the Libor rose consistently on the first day of each month. The banks earned hundreds of millions in wrongful profits as a result of artificially inflating Libor rates on the first day of each month.