BUS5440_Mark Tanner_Barclay LIBOR Scandal - 1 Who is hurt...

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1. Who is hurt and who benefits from the manipulation of LIBOR? London Inter-bank Offered Rate (LIBOR) is according to Investopedia.com is the most widely used benchmark for short term interest rates. With between 11 and 18 including five major currencies there are over 35 rates posted every business day. The 3-month US dollar rate is the most common posted rate. (LIBOR, 2016) As in any scandal of this proportion, there were people who benefited and people who were negatively impacted. Changes in LIBOR created large movement of resources and artificial reporting creates both winners and losers. The real winners in the LIBOR scandal were the borrowers who experienced lower interest rates as a result of the misrepresentation by reporting banks. On the other hand, people who were reliant on interest rate returns such as mutual fund or pension owners were negatively impacted by the misreporting of rates. It is difficult to say what the rates actually should have been therefore, it is difficult to say who won and who lost. (O'Toole, 2012) 2. Who was most responsible for the manipulation of LIBOR? Barclays was the bank at the center of this controversy. However, the reporting banks of which there were between 11 and 18 are all somewhat responsible for the scandal. It is simply not a one person show as to the responsibility of the failure. In a quote by Ben Bernanke, he stated that “he could not with full confidence that Libor is reliable. Because the BBA did not adopt most of the recommendations made by the New York fed.” This comment is related to emails sent by the NY fed to the Bank of England ways to prevent misreporting of LIBOR. (Bright, 2012)

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