Libor Judgment Gives FCA Leverage on Post-Scandal Culture
FCA Fines Barclays £26 Million After Finding ‘Systematic’ Libor Manipulation
The Financial Conduct Authority (FCA) has handed down a £26 million fine to Barclays Bank following a four-year probe into systematic manipulation of the London Interbank Offered Rate (Libor) between 2005 and 2009.
The FCA's investigation found that senior managers at Barclays encouraged traders to submit inaccurate Libor estimates to benefit the bank's positions in interest rate derivatives.
The FCA's judgment is a significant development in the long-running Libor scandal, which has led to billions of dollars in fines being imposed on banks around the world.
Libor and Its Role as a Reference Rate
Libor is a benchmark interest rate derived from the rates banks charge each other for short-term loans. It is widely used as a reference rate for pricing financial products, such as loans, mortgages, and derivatives.
The manipulation of Libor had a wide-ranging impact, leading to increased borrowing costs for businesses and consumers and eroding trust in the financial system.
FCA's Findings: Barclays' 'Systematic' Manipulation
The FCA's investigation revealed that Barclays traders engaged in systematic manipulation of Libor submissions during the 2005-2009 period.
The traders often submitted artificially low estimates to reduce the bank's Libor-based liabilities or artificially high estimates to increase profits on interest rate derivatives.
The FCA found that these actions were "systematic and widespread" within the bank and involved traders at all levels of seniority.
Culture and Compliance Failures at Barclays
The FCA's judgment also highlighted the role of culture and compliance failures at Barclays in facilitating the Libor manipulation.
The FCA found that senior managers encouraged traders to manipulate Libor to enhance the bank's profitability.
The FCA also found that Barclays had inadequate controls and supervision in place to prevent Libor manipulation and that there was a "lack of understanding" among senior management of the importance of compliance.
FCA's Message on Post-Scandal Culture
The FCA's fine against Barclays sends a clear message that banks will be held accountable for their conduct and that systematic failures in culture and compliance will not be tolerated.
The judgment also highlights the need for banks to foster cultures of integrity and compliance and to have robust systems in place to prevent misconduct from occurring.
The FCA's actions against Barclays are likely to have a significant impact on the post-scandal culture of the bank and the wider financial industry.
