Install our The LIBOR scandal was a major financial controversy that rocked the banking industry in 2012. The scandal centered around the manipulation of the London Interbank Offered Rate (LIBOR), a benchmark interest rate used to set rates for trillions of dollars' worth of loans and derivatives.
What is LIBOR?
LIBOR is a reference rate used to determine interest rates on loans and other financial instruments. It is calculated based on the interest rates at which major banks lend and borrow money from each other.
The Scandal
In 2012, it was discovered that several major banks, including Barclays, Royal Bank of Scotland, UBS, and JPMorgan Chase, had been manipulating LIBOR rates to benefit themselves. The banks would submit false interest rate data to the LIBOR fixing process, which would then be used to set rates for loans and derivatives.
Consequences
The consequences of the LIBOR scandal were severe. Several major banks were fined billions of dollars by regulators, and some even faced criminal charges. The scandal also led to a significant increase in regulatory scrutiny of the banking industry, with many reforms implemented to prevent similar scandals in the future.
Key Players Involved
- Barclays
- Royal Bank of Scotland
- UBS
- JPMorgan Chase
Regulatory Response
The regulatory response to the LIBOR scandal was swift and severe. Regulators, including the Federal Reserve and the European Central Bank, launched investigations into the scandal and imposed significant fines on the banks involved.
Rules and Reforms
In response to the scandal, regulators implemented several rules and reforms aimed at preventing similar manipulation of LIBOR rates in the future. These include stricter reporting requirements for banks and more robust oversight by regulators.