by James Honnan-Mellett
Shares in Barclays Bank have plunged 7 per-cent after a rally by top politicians who are demanding answers from chief executive Bob Diamond.
In the aftermath of the 2008 global recession, where insider traders and banking institutions toyed with market rates to produce a catastrophic financial meltdown, Barclays Bank has been accused of ‘systematic dishonesty’ after it was fined £290m for trying to manipulate interest rates.
Many other banks such as JP Morgan, Citigroup, Deutsche Bank, HSBC and RBS are now under investigation and could also face financial sanctions, as Barclays have admitted that its actions in the markets “fell well short of standards”. Many of these banks have also suffered sharp drops in their share prices this morning.
It’s been discovered that traders working for Barclays provided false information to make the bank and its financial investments look more secure throughout the course of the financial crises. Furthermore, it also appears that Barclays Bank carried out this insider rigging with staff at other banks around the world to make a profit.
Barclays Chief executive Bob Diamond and a number of other top level executives have chosen to wave their annual bonus, as his £2.7m cash bonus last year hardly reflected the bank’s stability. Martin Taylor, the former chief executive of Barclays, has revealed today that the manipulation looks like a “deliberate strategy” that has been going on for quite some time.
Barclays are accused of influencing Libor and Euribor, two of the most important interest rates in the global financial markets. These interest rates directly influence the value of trillions of dollars of financial deals between banking institutions all over the world.
They can also directly affect the borrowing rates to the public, in terms of mortgages and other substantial loans. However it’s not yet known if Barclays staff succeeded in influencing the interest rates, and it is yet to be determined if there has been any effect on the general public.
The Libor and Euribor rates are published every day by the British Bankers’ Association (BBA) and the European Banking Association in order to determine the strength of interbank lending rates.
However during 2005 and 2007, Barclays’ staff were lobbied by external traders and told to submit figures which would benefit Barclays’ trading influence, producing a profit for the bank. Furthermore, between 2007 and 2009 and subsequently the height of the banking crisis, Barclays staff submitted artificially low figures in the hope of deflecting attention from their financial stress. Therefore, Barclays would be allowed to borrow more as they would have been viewed in a strong financial position.
Nothing to hide
It’s been noted by insiders that staff at Barclays were very open with their attempts to lobby employees to submit false information about its financial strength, with some giving referencing to an ‘accepted culture’ of financial manipulation across the board.
There have been calls from many influential sectors of the market for Bob Diamond to resign, and for any Barclays staff involved in the scandal to face prison or at the very least a termination of employment.
The Financial Services Authority (FSA), who are conducting the on-going investigation, have revealed that there is large amount of email, text and instant message evidence that points to large scale insider rigging.
James Honnan-Mellett is an freelance writer, journalist and blogger who is currently writing on behalf of Brookson Accountants for contractors.