Libor rate scandal
PRESENTED BY
NIKHIL TIWARI
SCALE OF THE SCANDAL…
“This dwarfs by orders of magnitude any financial scam in the history of markets “
-Andrew LO,
Professor of Finance,
MIT
WHAT IS LIBOR ?
Libor is the benchmark interest rate that affects how consumers and companies borrow money across the world.
It the average interest rate calculated through the submission of interest rates by major banks in London.
It is controlled by British Bankers 'Association(BBA)
WHAT IS AFFECTED BY THE RATE ?
Derivatives
•Libor underpins at least $350 trillion in derivatives and other related financial products
Mortgages
•Of all the adjustable rate mortgages in US, 45% of the prime mortgages and 80% of the subprime have interest rates based on LIBOR
Student Loans
•About half of the variable rate private student loans are tied to the LIBOR.
THE SCANDAL…
The scandal arose when it was discovered that the banks were falsely inflating or deflating their interest rates so as to profit from trades, or to give impression of being more creditworthy than they actually were.
A rigging of LIBOR leads to manipulation of U.S. Derivatives market, and thus a violation of American Law.
The manipulation of submissions used to calculate LIBOR rates can have significant negative effects on consumers ,businesses and financial markets ,worldwide.
In June 2012, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the rate submissions , leading to the scandal being exposed.
WHAT HAPPENED NEXT?
The LIBOR Banks were sued in Civil court.
Charged of forgery, collusion, manipulation of mortgage rates.
Municipalities of US claimed that they lost billions due to rigging. The estimated amount was believed to be at least $ 6 billion.
SOME LEAKED TRANSCRIPTS…
Libor fixing a banking cartel
“ It’s just amazing how Libor fixing can make you that much money or lose if opposite. It’s
NIKHIL TIWARI
SCALE OF THE SCANDAL…
“This dwarfs by orders of magnitude any financial scam in the history of markets “
-Andrew LO,
Professor of Finance,
MIT
WHAT IS LIBOR ?
Libor is the benchmark interest rate that affects how consumers and companies borrow money across the world.
It the average interest rate calculated through the submission of interest rates by major banks in London.
It is controlled by British Bankers 'Association(BBA)
WHAT IS AFFECTED BY THE RATE ?
Derivatives
•Libor underpins at least $350 trillion in derivatives and other related financial products
Mortgages
•Of all the adjustable rate mortgages in US, 45% of the prime mortgages and 80% of the subprime have interest rates based on LIBOR
Student Loans
•About half of the variable rate private student loans are tied to the LIBOR.
THE SCANDAL…
The scandal arose when it was discovered that the banks were falsely inflating or deflating their interest rates so as to profit from trades, or to give impression of being more creditworthy than they actually were.
A rigging of LIBOR leads to manipulation of U.S. Derivatives market, and thus a violation of American Law.
The manipulation of submissions used to calculate LIBOR rates can have significant negative effects on consumers ,businesses and financial markets ,worldwide.
In June 2012, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the rate submissions , leading to the scandal being exposed.
WHAT HAPPENED NEXT?
The LIBOR Banks were sued in Civil court.
Charged of forgery, collusion, manipulation of mortgage rates.
Municipalities of US claimed that they lost billions due to rigging. The estimated amount was believed to be at least $ 6 billion.
SOME LEAKED TRANSCRIPTS…
Libor fixing a banking cartel
“ It’s just amazing how Libor fixing can make you that much money or lose if opposite. It’s