I’m using this as a reference piece for the LIBOR bank scandal.
LIBOR is the London InterBank Offered Rate. LIBOR banks (see below) send the British Bankers’ Association (BBA) a daily estimate of the rate they would be charged by other banks if they were borrowing.
(As noted in our LIBOR backgrounder, that’s an estimate of rates, not actual rates; and it’s the rate to borrowing, not to lend. That is, the banks only report their own estimated costs. That’s why there’s a LIBOR scandal. Those estimates are fudged in so many ways, all to benefit the reporting banks.)
As FedPrimeRate.com, a reference site, states:
There are many different LIBOR rates (maturities range from overnight to 12 months) for numerous currencies, including U.S. dollars[.] …
Back in the mid-1980′s, the world banking system adopted the LIBOR as a much needed benchmark for short-term, interbank loans. The LIBOR rates are now internationally recognized indexes used for pricing many types of consumer and corporate loans, debt instruments and debt securities across the globe. …
LIBOR rates are fixed every UK business day by the global media corporation Thomson Reuters, in association with the British Bankers’ Association (BBA), a nonprofit trade association.
LIBOR (again, just a series of estimated interbank interest rates) is determined in 10 currencies, but these four are primary, for obvious reasons (link pdf):
The four major LIBOR currencies are US Dollar, Sterling, Euro and Yen, but the recent commentary has been primarily in respect of Dollar LIBOR.
The list of banks involved in setting the Dollar LIBOR rate appears below. Three American banks and 16 foreign banks are surveyed for purposes of fixing LIBOR in U.S. dollars (“U.S. dollar fixing”).
The American banks included in the panel surveyed by the BBA for U.S. dollar fixing are:
- The Bank of America
- JP Morgan Chase
- Citibank, NA
There are 16 non-U.S. banks surveyed for U.S. dollar fixing in London. These banks are:
- Bank of Nova Scotia
- Bank of Tokyo-Mitsubishi UFJ Ltd
- Barclays Bank plc
- BNP Paribas
- Credit Agricole CIB
- Credit Suisse
- Deutsche Bank AG
- Lloyds TSB Bank plc
- Royal Bank of Canada
- Société Générale
- Sumitomo Mitsui Banking Corporation
- The Norinchukin Bank
- The Royal Bank of Scotland Group
- UBS AG
Why does this list matter? This is the list of potential perps in the LIBOR scandal. This is why the Fed is involved, and also the Feds (U.S. Justice Dept). I’ve seen estimates of #350 trillion to $800 trillion in loans and contracts hooked to LIBOR.
Our previous LIBOR coverage:
- Switzerland investigating bank rate-fixing abuses — Feb 4, 2012
- Barclays fined for manipulating Libor rates — June 28, 2012
- More banking scandals out of Wild West London — June 29, 2012
- Barclays scandal takes down Chairman, CEO remains for now — July 2, 2012
- This week in Not-Rule of Law — July 2, 2012
- Barclays CEO Diamond resigns under pressure — July 3, 2012
- LIBOR for Laymen—What is it and why should you care? — July 5, 2012 — Our backgrounder
- Barclays knew about Libor corruption four years ago — July 7, 2012
- Deutsche Bank under investigation for Libor manipulation — July 8, 2012
- Why the U.S. Justice Dept is investigating the LIBOR scandal — July 9, 2012
- Did the Bank of England approve Barclay’s false LIBOR rate submissions? — July 10, 2012
Just trying to make sense of LIBOR, so that when the Big Boys (Our Betters) blow up the world again, us Littles have a fair shot at understanding how they did it.
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