BBC World News to Premiere New 3-Part Series BANKERS, 11/9
BBC World News Bankers
As the global banking industry fights to regain trust and clean up its balance sheets, BBC World News is to broadcast a new programme exploring the now Infamous Libor rate fixing scandal. With high level interviews and expert analysis, Bankers - Fixing the system uncovers the scandal that ripped through the banking industry in 2012.
This documentary, which is part one of three, explores what happened through the downfall of American banker and former group Chief Executive of Barclays, Bob Diamond. Interviews include: former Barclays Chairman Marcus Agius, Chairman of RBS Group Sir Philip Hampton, Deputy Governor of the Bank of England Andrew Bailey, Jean-Claude Trichet President, European Central Bank (2003-2011), Gary Gensler, Chairman, US Commodity Futures Trading Commission and Lord Turner, Chairman of the UK's Financial Services Authority (2008-2013).
After the crash of 2008, governments around the world spent billions bailing out the banks and five years on public money is still propping up the system. But in 2012 people's trust in the system was rocked again, when the Libor scandal erupted. Libor is an obscure rate setting mechanism that relates to the loans banks make to each other. Although Libor is set in London, it's also used in America and all around the world. And by the end of 2012 traders across three global banking groups; Barclays, RBS and UBS stood accused of fixing this rate to make money simply for themselves.
As Gary Gensler, Chairman, US Commodity Futures Trading Commission tells the programme:
"This is the mother of all the reference rates. Some people might be familiar with reference rates in gold and in oil and, and some people even think of reference rates in housing markets where homes sell. But this is, is throughout our financial system it affects all of us really."
Discussing the impact of Libor, Gensler adds:
"It's massive. There's three hundred trillion dollars of contracts based on it. Let me repeat it's three hundred trillion dollars of contracts. That's about 6 times the world economy, just to put it in orders of magnitude of dollars of contracts."
Referring to the changing culture of banking that some feel set the context for Libor manipulation - from making money for clients to making money from clients, Chairman of RBS Group Sir Philip Hampton commented:
"What we lost sight of in this narrow pursuit of profit, is actually that banks have got a big complex role in society; they're not just about making profit for themselves this year, they are about greasing the wheels of, of commerce. They need to be stabilisers and that is part of their duty and it's part of the return they get."
And some in the industry felt not all Libor manipulation was a sin. Deliberately understating Libor estimates or Lowballing, so your institution does not stand out as one other banks don't want to lend to, could be understandable, if it was to try and keep the system afloat at the height of the crisis. Martin Taylor, Chief Executive of Barclays, (1994-98) commented:
"I don't regard that as a serious offence or even an offence at all. I think at the time the banks were not lending to each other, there barely was a Libor, out there. The most important thing for the authorities and the banks was to avoid the panic which was already very, very serious, getting worse than it was. And I think unnecessary fuss has been made about what may have happened in a few weeks in 2008. I've a lot of sympathy then with the editing of the... Libor rates, shall we say."