The Libor Scandal: Three Things to Know

July 10, 2012

The Libor Scandal: Three Things to Know
Explainer Video
from Video

Following investigations into Barclays’ manipulation of London Interbank Offered Rates (Libor), CFR’s Sebastian Mallaby highlights three implications from the unfolding scandal:

More From Our Experts

More on:

Financial Markets

Conflicts of Interest Within Banks: Barclays’ distorted reports on borrowing rates demonstrate the system’s failure to prevent damage from conflicts of interest between banks and their traders. "Chinese walls don’t work," Mallaby says. "It’s a lesson we’ve learned over and over again in finance."

More on:

Financial Markets

The Role of Regulators: The alleged collusion between the Bank of England and Barclays indicates a critical challenge in the governance of financial markets: Regulators are forced to bend rules to protect banks, "not because they are bribed," says Mallaby, "but because they are blackmailed, in the sense that the banks, by threatening to go under and do untold damage to the economy, can force regulators to bend the rules on their behalf."

More From Our Experts

More on:

Financial Markets

Responding to the Scandal: Calls for cultural change and for executives to give up remuneration simply scratch the surface, Mallaby argues. "The real lesson to be learned here is that banks which are too big to fail are also too big to exist," he says.

More on:

Financial Markets

Up
Close

Top Stories on CFR

Italy

Italy’s populist government has relished defying the European Union, and its latest showdown with Brussels could threaten the continent’s fragile recovery—and the global economy.

Women and Economic Growth

Closing the gender gap in the workforce could add a staggering $28 trillion to the global GDP.

Cybersecurity

Deep fakes are a profoundly serious problem for democratic governments and the world order. A combination of technology, education, and public policy can reduce their effectiveness.