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LostInParadise's avatar

What is is that Barclay's bank did wrong?

Asked by LostInParadise (18208 points ) July 4th, 2012

I don’t get it. They are accused of adjusting interest rates. Isn’t that what all banks do? If you don’t like the interest rate of one bank you go to another one. The interest rate that they are accused of adjusting is the one that banks use to loan money to one another, but does that work any differently than the rates that they pay depositors or charge to the public for borrowing?

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6 Answers

ETpro's avatar

They were rigging the Libor rates—the interest on interbank loans around the world that impacts $380 trillion in transactions. Being able to tweak that rate by even a tiny fraction of a percentage point could net a bank hundreds of billions in ill-got gains.

thebluewaffle's avatar

People seem to forget a bank is a ultimately a business, and a business’s main goal is to make a profit.

One day, especially in the U.K, money won’t be worth the paper it’s printed on.

@ETpro Jesus! I didn’t realise that a small change in percent would make such a big impact in the long run.

zenvelo's avatar

Their claims was what banks were charging them. By posting a lower rate than was true, it indicated that other banks found them creditworthy and that there was more liquidity available than was true.

LIBOR is used as the global equivalent of what “prime rate” used to indicate in the U.S. It’s used as the basis for loan rates all over. So Barclay’s distorted that rate, which gave inaccurate indications of the health of the credit system.

But the banks had been manipulating LIBOR for a long time, that became public knowledge years ago, it makes no sense to go after them now.

LostInParadise's avatar

Are you saying that what they did wrong was to lie about what other banks were charging them?

zenvelo's avatar

@LostInParadise Yes, that’s what they did wrong. It’s like lying on a credit application.

ETpro's avatar

@thebluewaffle People may forget banks are businesses motivated by profits. But bankers need to remember that banking is a business based solely on trust and transparency. We are already at a point where the slowly growing public awareness of the actions of the men behind the curtain my shut down the Great and Mighty Wizard of Oz illusion with devastating effect on the world’s economies.

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