The Barclays debacle

[Blurock]

Barclays CEO Robert Diamond has done the honourable thing and resigned, forfeiting GBP20 million in bonuses and share options.

Obviously Barclays will have many claims against them from clients who have lost on the deliberate miscalculation of LIBOR based interest. If Barclays had been misleading their clients for so long, then other senior managers must have been in on the scheme. Why then are the heads not rolling?

Absa, as a subsidiary of Barclays, would have quoted the same Barclays rate for their LIBOR linked transactions. Would there then be any claims against ABSA as well? Were the ABSA executives in on the deal?

Just asking...

[Dave A]

Obviously Barclays will have many claims against them from clients who have lost on the deliberate miscalculation of LIBOR based interest.

That's an interesting interpretation of what they did. My understanding is they understated their interest spread on LIBOR loans when reporting to the Bank of England / Treasury.

I don't think ABSA is involved, at least not the way you suggest. The one possible consequence that was raised is Barclays might have to sell off ABSA to raise cash...

[Blurock]

That's an interesting interpretation of what they did. My understanding is they understated their interest spread on LIBOR loans when reporting to the Bank of England / Treasury.

The "spread" is bank jargon or terminology. It is actually the difference between the interest rate set by the Bank of England and the LIBOR Rate. By setting the rate lower, Barclays could make more profit on transactions. Much like the "PIPS" taken on forex deals. If you are a regular forex trader, you would probably be able to negotiate a better forex rate than say the uninformed occasional traveller.

Barclays has admitted that some of its traders attempted to manipulate the setting of the London interbank offered rate (Libor), which is used worldwide as a benchmark for setting prices on about $350 trillion of derivatives and other financial products. Reuters

It appears as if this scandal has blown over to the US and more than a dozen banks, including Citibank, HSBC and UBS are being probed. The banks are being accused of colluding to manipulate the global benchmark LIBOR rate that sets prices on USD350 trillion of derivatives and other financial products.

Is ABSA, as a subsidiary of Barclays, squeaky clean? Any one involved in trading in financial instruments should do their homework and double check to see if they had been quoted the correct rates on financial transactions.

[Blurock]

By manipulating the LIBOR rate, banks involved in the collusion have tried to understate their borrowing costs. This would make them look healthier in a shaky economy.

The manipulation of the rates also had the effect that clients were quoted the wrong rates, which affected the interest paid on transactions. There are four types of alleged victims;

1. Firms that held Libor-linked bonds and other securities issued by banks involved in the rate-setting process.
2. Public fund managers that bought interest-rate swaps with returns based on Libor.
3. Investment funds that traded financial instruments like Eurodollar futures tied to Libor.
4. Finally there are shareholders who lost money on Barclays shares after the bank revealed its wrongdoing.

In the US class actions are taken against the banks allegedly involved in colluding to manipulate the Libor rate. More lawsuits may follow if other banks are implicated. The lawsuits rely on essentially three legal theories: Antitrust, Racketeering and Securities Fraud.

[wynn]

And now the USA is coming to the party

http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620

[Blurock]

HSBC has just apologised to the American public following an enquiry into possible money laundering.

Now may not be a good time to own Bank shares.

[Dave A]

How did the government manage to make a case against so many Wall Street scam artists? Hubris. As was the case in Jefferson County, Alabama, where Chase executives blabbed criminal conspiracies on the telephone even though they knew they were being recorded by their own company, the trio of defendants in Carollo wantonly fixed bond auctions despite the fact that their own firm was taping the conversations. Defense counsel even made an issue of this at trial, implying to the jury that nobody would be dumb enough to commit a crime by phone when "there was a big sticker on the phones that said all calls are being recorded," as Grimm's counsel, Mark Racanelli, put it. In fact, Racanelli argued, the conversations on the tapes hardly suggested a secret conspiracy, because "no one was whispering."

But the reason no one was whispering isn't that their actions weren't illegal – it's because the bid rigging was so incredibly common the defendants simply forgot to be ashamed of it. "The tapes illustrate the cavalier attitude which the financial community brought toward this behavior," says Michael Hausfeld, a renowned class-action attorney whose firm is leading a major civil suit against Bank of America, Wells Fargo, Chase and others for this same bid-rigging scam. "It became the predominant mode of transacting business."

Read more: http://www.rollingstone.com/politics...#ixzz20wiFoxMM

I couldn't help but think of what is emerging in our schoolbook delivery scandal at the moment, including questions as to why the heck procurement is put out to contract the way it is in the first place. Truth is placing public procurement via intermediaries to skim off the top has become so common place here no-one is even bothering to hide it anymore. It's just standard business...

[wynn]

And now South Africa is also affected

http://mg.co.za/article/2012-07-19-sas-vulnerability-lies-in-the-foreign-exchange-market

Seems we are affected by master scamsters hiding behind Banks fidelity???

[Blurock]

I suppose South African entities that benefited from a lower LIBOR rate would not lodge a complaint?