Question

3. What factors contributed to the manipulation of the LIBOR by individual traders in the case of Barclays and LIBOR: Anatomy of a Scandal ?

Answer 1

3.

There were different factors that contributed to the manipulation of LIBOR rates. The first factor was the Barclays trying to build a false public perception that it is not at risk. Though, the reverse was the case and Barclays were putting higher rates, but manipulated it using submitters and traders so that people will not be knowing about the risk level held by the Barclays. The second factor was the greed and moral hazard that made traders and submitters to collude and manipulate the rates given by Barclays to make it lower to the level of other rates. It were helping traders get quick money and they could get it by manipulation. The third factor was to deceive the investors and shareholders and not letting them to go for the panic selling. It all resulted into LIBOR-Barclays scandal where top management were involved in manipulating the submitters to keep rates submitted by Barclays to the level of rates submitted by other banks. It made the false perception that risk profile of Barclays is similar to the other banks and there is no need of concerns, though the reality was different and Barclays were at higher risk in comparison to other banks. It created the scandal.