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Rough Diamond… July 3, 2012

Posted by Audit Monkey in The State of the British Nation, Working Life in Britain.
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So, we all know all the big news. According to tonight’s Evening Standard, Serena Williams hasn’t had a date in quite a long time. I can’t say I’m not surprised. However, the real big news is Bob Diamond resigning as CEO of Barclays due to the LIBOR scandal. I’ve already commented elsewhere on the Blog on my thoughts regarding banking. Somehow the great British people seem to think banking is run by the people, for good of the people. Sorry to disappoint, but no. Banks are banks; they make money by charging interest or commission on monetary transactions. They aren’t doing it for love, well, they are, the love of money.

This aside, I am slightly confused with the LIBOR scandal. LIBOR is calculated from submissions from sixteen banks for the cost of their borrowing for up to 10 currencies in 15 different time frames. The top four rates and bottom four rates are excluded for each calculation and an average calculated. Barclays traders are alleged to have requested or pressured their colleagues to adjust LIBOR to make certain derivative trades more favourable.

The bit I’m confused with is the ‘influence’ Barclays could have had on the market. Surely if rates are aggregated and trimmed from 16 sources, outliers would have stood out? If one bank submits false rates out of kilter with the market, surely, someone where, would have noticed? Answers on a postcard.

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1. ITmonkey101 - July 4, 2012

This hasn’t really been explained – even if you had buddies in *all* the other banks who would do your bidding for a bottle of bolly, is it not likely that at least one other institution would be trying to influence the rate in the opposite direction? I suspect the real story is that the BoE has been putting pressure on the institutions to report low rates and that will be the big issue that Cameron’s inquiry won’t know what to do about. It’s all a load of blah blah anyway because I doubt the majority of the great unwashed don’t understand any of this and care even less.


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