From Richard Farley, Leveraged Finance partner at lawyers Paul Hastings
Last Friday, Britain’s top financial regulator, Martin Wheatley of the Financial Services Authority, issued his final report with recommendations for the comprehensive reform of the scandal-ridden LIBOR setting process. Read more
The massive flaws in the method of setting Libor and similar rates are probably familiar to most FTAV readers by now — as are the challenges of coming up with a better replacement.
The review led by new FSA chief Martin Wheatley set out to either “strengthen Libor” or “find an alternative to Libor”. Read more
Here’s another addition to the canon of Libor-related conversations.
A former RBS employee is suing the bank for wrongful dismissal after the bank fired him last year for allegedly participating in Libor-fixing. Tan Chi Min, the ex-employee in question, was the bank’s Singapore-based head of delta trading for Asia. Read more
The Treasury Committee has let loose some letters between its chairman, MP Andrew Tyrie, and the former chief executive of the FSA Hector Sants. The subject matter of the correspondence concerns the original approval by the FSA of Bob Diamond appointment as CEO of Barclays back in 2010.
The freshly released content (see below) provides confirmation that the FSA caveated its approval of Diamond with a warning that it could change its mind if there was an adverse outcome from the Libor investigation. Read more
John Mann, the battler from Bassetlaw, is back with the results of his very own banking inquiry.
The Labour MP set up the alternate inquiry after expressing his displeasure at the omission of fellow committee member Andrea Leadsom and his good self from the specialist Libor inquiry because they were “too outspoken”. The words “whitewash” and “farce” also made an appearance: Read more
By now everyone is well aware of the flaws associated with the Libor-setting process. As yet, however, no alternative has been deemed full-proof enough to replace it.
The search for a better system, however, is on. Read more
Click to enlarge:
It’s the product of all those Select Committee hearings, including appearances by Messrs. Diamond and Tucker. It is only a preliminary report. But it does not have kind words for the authorities who failed to stop the attempted manipulation of Libor before and during the financial crisis. (Barclays management is of course completely coruscated.) As jaded as we’ve all become by the Libor scandal, it’s pretty damning. Read more
Ever wondered just how many Libor rates are kinda… more or less… fictional? In the sense that sure, maybe a bank “could” borrow there, but they don’t tend to.
The initial discussion paper of the Wheatley Review of Libor, has some nice graphics on exactly this topic. Read more
You’ll have read a preview of this here, but the plan of action for reforming or replacing the London Inter Bank Offered Rate has now been mapped out by the incoming boss of the Financial Conduct Authority, Martin Wheatley, is now out.
Don’t get too excited. Read more
… with their 2012 interims.
The TL;DR version goes like this: Read more
The bank beat expectations with an adjusted profit before tax of £4.2bn, cut its eurozone exposures, set aside £450m to compensate small and medium-sized businesses that were mis-sold interest rate hedging products and said sorry again… which was nice.
From the statement: Read more
warning update from Deutsche Bank on Tuesday (flashes via Reuters):
DEUTSCHE BANK AG PROVIDES PRELIMINARY UPDATE ON SECOND QUARTER 2012 RESULTS: COSTS IMPACTED BY CURRENCY MOVEMENTS Read more
On the surface, the story around Libor is relatively easy to understand, hence easy to write something about. All one needs to reel readers in is a big, flashy headline number. Or so goes the theory…
Unfortunately, there aren’t any easy numbers to hand. This has not, however, stopped people from finding some figures to abuse. Read more
At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s business and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars… In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.
A classic quote from The Great Crash, by J K Galbraith. “Enormously improved” always reads more than a little sarcastic. Read more
Last week we posted a note from Morgan Stanley analysts, who tried to guess at the final ultimate cost of the Libor scandal to banks – a combination of expected regulatory fines, litigation outcomes, and the business uncertainty caused by the mess.
A note from Nomura, which we’ve just posted in the usual place, arrives at a more open-ended conclusion while doing the kind of Libor vs Libor-proxy comparison that we’ve come across now and again (in this case the proxy was the Federal funds effective rate plus each bank’s one-year CDS). Read more
Some suggestions on how to improve Libor…
The first is from the Economist, which compares Libor with the problems facing an art gallery or museum — price discovery in many markets is a tricky process. Read more
Some emails between Paul Tucker and Bob Diamond courtesy of John Mann MP. Not as explosive as billed but there is a Libor-headed email to Bob that makes reference to HSBC, RBS “Stuart”, “Johnny” and Mark Dearlove from May 2008.
Click through the pics for the full docs (although there ain’t that much more): Read more
We have Sir Mervyn King, Governor; Paul Tucker, Deputy Governor; Donald Kohn and Lord Turner, Members of the Interim Financial Policy Committee, Bank of England.
At pixel time this was going on… Read more
“I passed the instruction, as I had received it…”
Click the pic for the feed from the Wilson Room in Porticullis House: Read more
Click pic for the full list of documents. Some are official reports on Libor, while others - such as the excerpt below – are the NY Fed talking to Barclays traders…
FR: Hmm. Read more
Has the Bank of England been reading Chris Giles?
With the press looking to work up a decent Fed angle to the Libor furore, Britain’s central bank has just gone ahead and published correspondence between Sir Mervyn King and Tim Geithner, then president of the NY Fed, along with Paul Tucker’s related correspondence with the BBA. Read more
It’s been a little while since we had a nice Libor risk estimate so we were delighted when Morgan Stanley’s attempt dropped into our inbox. MS take the Libor risk in three chunks:
1) Regulatory fines (an estimated median 7 to 12 per cent hit to 2012 EPS). From MS (all with our emphasis): Read more
First, an inventory from Barclays’ Marcus Agius to Committee head Andrew Tyrie in advance of his appearance on Tuesday morning (click through the pics to get the full documents):
This is one hurt banker.
Bob Diamond is letting all his stock and options lapse as he departs from Barclays. Read more
Click the pic for the live* feed from Wilson Room, Portcullis House…
As last week was dominated by holidays and the Supreme Court’s healthcare ruling in the US, it’s taken a little longer than usual for some of the econoblogopunditsphere there to get really fired up about the Libor scandal. But it’s well and truly happening now.
First up Nouriel Roubini, who says things have become worse since then financial crisis: the TBTF banks are bigger, along with their conflicts of interest. Our (rough) transcript of one part follows: Read more
Revealing little, but here it is — the Bank of England’s response to a Freedom of Information Act request from John Mann MP, seeking “copies of emails and transcripts of telephone conversations between Deputy Governor, Paul Tucker and Bob Diamond, Chief Executive of Barclays between 1 October 2008 and the 30 November 2008.”
Covering letter… (click the images) Read more
An FT headline, a few days ago (on a decision last summer):
SFO opted against probe into Libor
We think it’s worth noting that the The Economist is now using the Bankster word in its coverage of the Libor scandal, due to be published in print on Friday, but available in pixelated form here.
That’s the “newspaper’s” leader on the matter. An extract: Read more
Key sentence is “senior resignations at the bank and the consequent uncertainty surrounding the firm’s direction are negative for bondholders”, although they add that recent events could be positive over the long term. Below is the full statement:
Moody’s changes outlook on Barclays’ standalone rating to negative Read more