Joint cross-border investigations by the U.S. (Commodity Futures Trading Commission , the U.S. Dept. of Justice) and the U.K. (Serious Fraud Office) have resulted in an agreement by Barclays PLC to pay $453 million in fines for illegally manipulating the inter-bank rate, LIBOR.
These agreements may well lead to additional investigations and private litigation that could billions of dollars. It is also likely that the Bank of England and the Financial Services Authority will become much more involved in this entire process of setting inter-bank rates in the future. Other authorities may well begin investigations such as Germany and the European Union. Civil litigation by a host of other entities may well be filed, by cities, states, private institutions and class actions.
What does this say about global banking, corporate responsibility and regulation (national and international)?
To me it says to me five things.
One, global financial institutions need to be aggressively monitored by national regulators.
Two, greater extraterritorial regulation by the U.S. is fully justified as to this type of illegal activity impacting the U.S. firms and economy.
Three, these financial institutions need more effective board supervision.
Four, management and board members involved in this should resign immediately. The bank is going to face huge civil and derivative shareholder lawsuits and possible criminal prosecutions. (Has anyone ever heard of price-fixing — the conspiracy to fix the rate the loans are sold for or adjusted, sometimes higher and, yes, sometimes lower?)
Five, greater global and international mechanisms need to be developed to ensure transparency and legality of global financial transactions.
It is amazing to me that these types of unsavory bank actions continue. They take place even after the financial crisis of 2008 and while the world economy continues to struggle.
Better public policies need to be developed regulating these institutions and more effective corporate governance needs to be effectuated.
Lying about LIBOR is not a good thing.