CASE ETH-03 DATE 110713 Shei

CASE: ETH-03
DATE: 11/07/13
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BARCLAYS AND THE LIBOR:
ANATOMY OF A SCANDAL
Culture is difficult to define, I think it's even more difficult to
mandate—but for me the evidence of
culture is how people behave when no one is watching.
1
-Bob Diamond, (former) Barclays CEO
INTRODUCTION

On June 27, 2012, the storied British bank Barclays admitted
that it repeatedly attempted to rig
the London Interbank Offered Rate (LIBOR) over a four-year
period from 2005-2009. The
LIBOR was calculated daily, based on the rates at which 16
banks estimated they could borrow
money.
2
Barclays, as one of these banks, regularly submitted rates that
were either falsely
inflated or deflated, first with the aim of benefitting its trading
positions and later, during the
financial crisis, with the intention of projecting an image of
strength and solvency. Tracy
McDermott, acting director of enforcement and financial crime
at the United Kingdom (U.K.)
Financial Services Authority (FSA), stated: “Barclays’
misconduct was serious, widespread and
extended over a number of years…Barclays’ behavior
threatened the integrity of the rates with
the risk of serious harm to other market participants.”
3
In its settlement, Barclays agreed to pay
$453 million in fines and penalties to bank regulators in the
U.K. and U.S.

4
1
“Today Business Lecture” delivered in 2011, quoted in Fixing
LIBOR: some preliminary findings, Paragraph 111,
http://www.publications.parliament.uk/pa/cm201213/cmselect/c
mtreasy/481/48103.htm (September 19, 2013)
2
In 2012, the number of banks on the Libor Panel was increased
to 18.
3
House of Commons Treasury Committee, Fixing LIBOR: some
preliminary findings, Paragraph 7
mtreasy/481/48103.htm (September 19, 2013).
4
This included a $200 million civil penalty levied by the U.S.
Commodity Futures Trading Commission; a $160
million penalty from the U.S. Department of Justice; and a
£59.5 million fine by the U.K. Financial Services
For the exclusive use of R. Ahmed, 2022.
This document is authorized for use only by Rashik Ahmed in
FIN 9858 Summer 2022 taught by RHONDA HALPERN, CUNY
- Baruch College from Jun 2022 to Jul 2022.
mailto:[email protected]
mtreasy/481/48103.htm

Barclays and the LIBOR: Anatomy of a Scandal ETH-03
p. 2
Barclays CEO Bob Diamond—who was in charge of Barclays
Capital from 2005-2009, the
period during which the breaches occurred—announced that he
and three other executives would
waive their annual bonuses, an act of contrition that was quickly
deemed inadequate, and even
dubbed “utterly pathetic” by one commentator.
5
On July 1, 2012, Prime Minister David Cameron
announced a full parliamentary inquiry into LIBOR rate rigging,
and raised the possibility of
criminal sanctions. During the next few days there was turmoil
in Barclays’ leadership,
culminating in Diamond’s resignation.
Newspapers decried Barclays’ rate-rigging efforts as “the
scandal of all scandals”
6
and

bemoaned the spread of “Wall Street sleaze.”
7
Numerous hearings, audits, and other post-
mortems were conducted in an attempt to understand how the
rigging had been carried out and
why it had gone undetected for so long. Barclays was credited
for cooperating with investigators
and agreeing to settle at an early stage; the fine levied by the
FSA was therefore reduced by 30
percent.
8
Throughout the process, Barclays insisted that it was not alone
in its manipulation of
the LIBOR. In a July 15, 2012 memo entitled “Restoring our
reputation, building our business,”
Barclays’ executive committee stated, “As other banks settl e
with authorities, and their details
become public, and various governments’ inquiries shed more
light, our situation will eventually
be put into perspective.”
9
By late 2012, dozens of other banks did indeed face LIBOR-
rigging
inquiries by regulators in various countries.

BACKGROUND
The LIBOR
The LIBOR was a cornerstone of global financial markets.
Roughly speaking, it was the interest
rate that banks charged each other for short-term loans. The
LIBOR was calculated for 10
different currencies and 15 borrowing periods. The person
submitting the daily LIBOR data for
a bank was supposed to submit the interest rate the bank would
have to pay on a loan for a
particular term in a particular currency. Often, a bank was not
in the market for a particular type
of loan, and in such situations the submitter was supposed to
give a good-faith estimate of the
interest rate his or her bank would pay were it seeking a loan
just prior to 11:00 a.m. GMT. The
estimated rates were sent to the British Bankers Association
(BBA), a trade group, and the
Authority. See George Gilligan, “The Libor Scandal: Another
Example of Neutralized and Routinized Deviance in
the Financial Services Sector?,” The University of New South
Wales, Centre for Law, Markets & Regulation,

http://www.clmr.unsw.edu.au/article/ethics/libor-
manipulation/libor-scandal-another-example-neutralised-and-
routinised-deviance-financial-services-sector (September 19,
2013).
5
“Agius takes the bullet,” The Economist, July 1, 2012
http://www.economist.com/blogs/schumpeter/2012/07/barclays-
and-libor (September 5, 2013).
6
Robert Reich, “The Wall Street Scandal of All Scandals,” July
7, 2012, http://www.huffingtonpost.com/robert-
reich/libor-wall-street_b_1656665.html (September 19, 2013).
7
Robert Reich, “Wall Street Sleaze Keeps Growing,” July 14,
2012, http://www.sfgate.com/opinion/article/Wall-
Street-sleaze-keeps-growing-3705814.php (September 19,
2013).
8
Financial Services Authority, “Final Notice, To Barclays Bank,
PLC,” Section 2, June 27, 2012,
http://www.fsa.gov.uk/static/pubs/final/barclays-jun12.pdf
(September 19, 2013).
9
“Rivals LIBOR woes to put Barclays’ in perspective: memo,”
Business Standard, July 15, 2012,
http://www.business-standard.com/article/international/rivals-
libor-woes-to-put-barclays-in-perspective-memo-
112071500061_1.html, (September 19, 2013).

http://www.clmr.unsw.edu.au/article/ethics/libor-
routinised-deviance-financial-services-sector
http://www.clmr.unsw.edu.au/article/e thics/libor-
routinised-deviance-financial-services-sector
http://www.economist.com/blogs/schumpeter/2012/07/barclays-
and-libor
http://www.huffingtonpost.com/robert-reich/libor-wall-
street_b_1656665.html
http://www.huffingtonpost.com/robert-reich/libor-wall-
street_b_1656665.html
http://www.sfgate.com/opinion/article/Wall-Street-sleaze-keeps-
growing-3705814.php
http://www.sfgate.com/opinion/article/Wall-Street-sleaze-keeps-
growing-3705814.php
http://www.fsa.gov.uk/static/pubs/final/barclays-jun12.pdf
p. 3
LIBOR was calculated as the average of these submitted rates,
after the removal of high and low
outliers. In the case of the U.S. dollar LIBOR, the top four and

bottom four submissions were
eliminated and the middle eight were averaged to determine the
rate.
The LIBOR’s origins stem from the informal practices of a
clubby group of British gentlemen
bankers in the 1960s. Beginning in the 1980s, the process
became more formalized and was
taken over by the BBA. BBA regulations stated clearly that the
only factors to be considered in
submitting a rate were those related to the cost of borrowing
unsecured funds.
The LIBOR was used for hundreds of trillions of dollars of
financial transactions, including
consumer loans, mortgages, and much of the global trade in
financial derivatives. In 2012, The
New York Times reported that about 45 percent of prime and 80
percent of subprime mortgages
had interest rates based on the LIBOR; and about half of
variable rate student loans were set
according to the LIBOR.
10
The BBA estimated that $350 trillion of notional swaps and
$10

trillion of loans were indexed to the LIBOR.
11
Trying to determine who may have been
harmed—or helped—by the rate-rigging was described as a
“gargantuan task.”
12
Two Forms of Rate-Rigging
Two main forms of rate-rigging took place at Barclays. The
first occurred primarily between
2005 and 2007 and involved individual traders requesting the
submission of rates that would
benefit their transactions, rather than rates at which Barclays
actually believed it could borrow
money. The person who submitted a bank’s data for LIBOR
calculations could overstate or
understate the true rate that the bank would pay on short-term
loans. By doing so, he could help
traders who had taken positions that depended on the LIBOR
rate. For example, a Barclays’
trader in New York might take a position that would be highly
profitable if the LIBOR rate were

low, and then send an e-mail to the Barclays trader in London
who was in charge of submitting
rates, asking him to submit a low value. Exhibit 1 gives an
example of how a trader could
benefit from LIBOR rate-rigging.
The second form of rate-rigging occurred during the 2007-2008
credit crisis, when banks were
concerned about appearing strong. One indicator of a bank’s
strength was whether other banks
were willing to lend it money on favorable terms. Each bank
thus had an incentive to
underreport the rates it would have to pay if it sought loans.
According to British regulators,
high-level Barclays’ officials ordered subordinates to submit
lower LIBOR estimates to avoid
seeming weak. However, in testimony, a senior Barclays’
executive involved in the rate-rigging
said he was just trying to keep Barclays in good favor with
government officials, who were
unhappy when Barclays submitted high rates for LIBOR
calculations.
10

“Behind the LIBOR Scandal,” Business Day Deal Book, The
New York Times, July 10, 2012,
http://www.nytimes.com/interactive/2012/07/10/business/dealbo
ok/behind-the-libor-scandal.html (September 19,
2013).
11
Commodity Futures Trading Commission, “In the Matter of
Barclays PLC, Barclays Bank PLC, and Barclays
Capital Inc,”
http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/
documents/legalpleading/enfbarclaysorder062712.p
df, p. 5 (September 19, 2013).
12
Kirsten Grind, “What Libor Means for You,” The Wall Street
Journal, August 3, 2012,
http://online.wsj.com/article/SB10000872396390443545504577
565120728037852.html (September 19, 2013).
http://www.nytimes.com/interactive/2012/07/10/business/dealbo
ok/behind-the-libor-scandal.html

documents/legalpleading/enfbarclaysorder062712.pdf
documents/legalpleading/enfbarclaysorder062712.pdf
http://online.wsj.com/article/SB10000872396390443545504577
565120728037852.html
p. 4
HOW THE RATE-RIGGING WORKED
A ream of evidence was brought forth from the start of the FSA
investigation into Barclays
LIBOR rigging in 2010 to the settlement in 2012. The hearings
that followed Barclays’
settlement provided insights into the culture of the bank and the
psychology of the key actors.
The First Phase: Helping Traders
Efforts by individual Barclays traders to manipulate the LIBOR
rate were conducted with no
attempt at secrecy; on the contrary, they were made in person,
by e-mail, and via instant
messaging.

13
Traders sometimes made notes in their electronic calendars to
remind themselves
what request to submit the next day. One derivatives trader
shouted across the Euro Swaps Desk
to ensure his request did not conflict with those of his
colleagues.
14
Occasionally, traders
discussed specific requests with their desk managers.
15
The “vast majority” of requests came
from traders on Barclays’ New York Interest Rate Swaps Desk,
in New York and London, and
involved the U.S. dollar LIBOR.
16
A report by the U.S. Commodity Futures Trading
Commission (CFTC) concluded that “Barclays’ violative
conduct involved multiple desks,
traders, offices and currencies, including United States Dollar
(“U.S. Dollar”), Sterling, Euro and
Yen. The wrongful conduct spanned from at least 2005 through
at least 2009, and at times

occurred on an almost daily basis.”
17
Barclays’ derivatives traders also sometimes tried to influence
the LIBOR submissions of other
banks by asking external traders to pass on requests to their own
banks’ submitters.
18
Likewise,
traders helped colleagues who had left for other banks by
accepting a request to alter the LIBOR
rate and passing it on to Barclays’ submitters.
19
Sometimes the trades that led to requests for
specific LIBOR submissions were intended to benefit the
individual trader and sometimes they
were intended to benefit the bank.
Barclays’ LIBOR rate submissions were made through Barclays
Capital’s London Money
Market Desk. According to the CTFC, the senior LIBOR
submitter was considered an expert on
U.S. dollar money markets and had more than 25 years of
experience in this area.

The FSA cited the following examples of traders’ requests for
LIBOR manipulation:
Trader C requested low one-month and three-month US dollar
LIBOR
submissions at 10:52 am on 7 April 2006 (shortly before the
submissions were
due to be made); “If it’s not too late low 1m and 3m would be
nice, but please feel
free to say “no”... Coffees will be coming your way either way,
just to say thank
you for your help in the past few weeks.”
13
Commodity Futures Trading Commission, op. cit., p. 8
14
preliminary findings, Section 35
15

16
Ibid.
17
18
preliminary findings, Section 31,
19
p. 5

On 26 October 2006, an external trader made a request for a
lower three-month
US dollar LIBOR submission. The external trader stated in an
email to Trader G
at Barclays “If it comes in unchanged I'm a dead man”. Trader
G responded that
he would “have a chat”. Barclays’ submission on that day for
three month US
dollar LIBOR was half a basis point lower than the day before,
rather than being
unchanged. The external trader thanked Trader G for Barclays’
LIBOR
submission later that day: “Dude. I owe you big time! Come
over one day after
work and I'm opening a bottle of Bollinger.”
20
However, for the most part, requests to manipulate the LIBOR
were evidently too ordinary to
merit champagne, or even coffee. The CFTC cited the
following internal emails in its report:
21

“WE HAVE TO GET KICKED OUT OF THE FIXINGS
TOMORROW!! We
need a 4.17 fix in 1m (low fix) We need a 4.41 fix in 3m (high
fix)”
- November 22, 2005, senior trader in New York to trader in
London
“Your annoying colleague again ... Would love to get a high 1m
Also if poss a
low 3m... if poss ... thanks”
-February 3, 2006, trader in London to submitter
Responses by the submitters, as reported by the CTFC, included
the following:
“Always happy to help, leave it with me, Sir.”
-March 20, 2006, submitter’s response to a request
“Done…for you big boy…”
-April 7, 2006, submitter’s response to swaps trader requests for
low one-
month and three-month U.S. dollar LIBOR
The FSA reported that on March 13, 2006, the following e-mail

exchange took place
between a trader and submitter:
22
Trader C: “The big day [has] arrived… My NYK are screaming
at me about an
unchanged 3m libor. As always, any help wd be greatly
appreciated. What do you
think you’ll go for 3m?
Submitter: “I am going 90 altho 91 is what I should be posting”.
Trader C: “[…] when I retire and write a book about this
business your name will
be written in golden letters […]”.
Submitter: “I would prefer this [to] not be in any book!”
The Second Phase: Appearing Strong During the Crisis
20

21
Commodity Futures Trading Commission, op. cit., pp. 9-10
22
PLC,” op.cit., Section 59.
p. 6
The second phase of LIBOR manipulation occurred during the
credit crisis of 2007-2008, when
analysts began to look at banks’ LIBOR submissions as a means
of gauging their financial
health. On September 3, 2007, Bloomberg published an article
called “Barclays Takes a Money
Market Beating,” noting that Barclays’ LIBOR submissions
were high compared to other banks

and asking, “So what the hell is happening at Barclays and its
Barclays Capital securities unit
that is prompting its peers to charge it premium interest rates in
the money market?”
23
Barclays’
senior managers were unhappy about the negative publicity,
using the term “head above the
parapet” to describe what happened when Barclays’ LIBOR
submission was high relative to
other banks. According to former Barclays Chairman Martin
Agius, the concern was that
…people might falsely or incorrectly conclude that we were
having more trouble
funding than we actually were. And again, to put this into
context, anybody who
was not on the bridge of a bank during the financial crisis—and
many others
besides—who says it was not terrifying was not there. These
were very difficult
times and we were very nervous that we may be misinterpreted
by the market as
to our financial strength.
24

Submitters were thus instructed that Barclays should avoid
unwanted market and media scrutiny.
According to the FSA Final Notice, “Senior management’s
concerns in turn resulted in
instructions being given by less senior managers to Barclays’
submitters to reduce LIBOR
submissions in order to avoid further negative media comment.
The origin of these instructions
is unclear.”
25
Submitters were advised that Barclays’ rates should be within
ten basis points of
those made by other banks. Discussions regarding the rate to be
submitted were recorded in
numerous phone calls and emails.
Exhibit 2, from The Guardian, shows for the time period 2007-
2008 Barclays’ LIBOR
submissions (in red) and the fix based on all banks’ submissions
(in blue). It shows that
Barclays’ submissions were typically a bit above the fix, and
noticeably higher in August and

December 2007, as well as during the height of the financial
crisis in late 2008.
WHO KNEW WHAT WHEN
Despite the extensive trail of e-mails and text messages
documenting LIBOR manipulation, there
was substantial disagreement about who within Barclays was
aware of what was happening, as
well as who bore ultimate responsibility. Another important
question was whether top Barclays
officials had failed to implement adequate internal controls to
prevent misconduct.
Oversight of Individual Traders
Barclays consistently denied that anyone in a senior position
was aware of the efforts made by its
derivatives traders to manipulate the LIBOR. In a letter to the
House of Commons Treasury
Committee, Diamond wrote “the authorities found no evidence
that anyone more senior than the
23

24
preliminary findings, Volume 2, Q649,
mtreasy/481/481ii.pdf (September 19, 2013).
25
PLC,” op.cit.,Paragraph 14.
mtreasy/481/481ii.pdf
p. 7
immediate desk supervisors was aware of the requests by
traders, at the time that they were

made.”
26
Some MPs expressed incredulity over this claim while
questioning Diamond:
John Mann: … Nobody came to you, not even those people who
had refused to
act criminally but had been asked to do so? You said to Mr.
Garnier that some did
and some didn’t. So even those who had refused to act
improperly did not come
and tell you—that never got to you during that three-year
period?
Bob Diamond: Well, they didn’t act improperly.
27
The FSA noted “LIBOR issues were escalated to Barclays’
Investment Banking compliance
function (“Compliance”) on three occasions during 2007 and
2008. In each case Compliance
failed to assess and address the issues effectively.”
28
An external review commissioned by
Barclays concluded that individual employees who were

concerned about Barclays’ practices
were expected to fend for themselves, and received little
backing from either human resources
officers or senior management.
During the Credit Crisis
Barclays did not argue that senior managers were unaware of
the second phase of manipulation
that occurred during the credit crisis. Indeed, suspicions existed
even outside Barclays.
On May 29, 2008, the Wall Street Journal (WSJ) published an
analysis of LIBOR rates, and
concluded that 15 of the 16 banks were understating their rates.
The banks’ rates appeared to be
artificially similar to each other, which was strange given the
fact that some of the banks were
much weaker than others, and thus at a higher risk of default.
The newspaper quoted Professor
Darrell Duffie of the Stanford GSB as calling the rates “far too
similar to be believed.” However,
in the study, Barclays was far from the worst offender—in fact,
according to the WSJ’s analysis,

two-thirds of the other banks’ rates were less believable than
those submitted by Barclays.
Government officials had prior warning of the problem. In a
December 17, 2007, phone call, an
unidentified Barclays’ official told unidentified New York
Federal Reserve Bank officials,
“LIBOR’s being set too low anyway.”
29
While that phone call contained no specifics, an April
11, 2008, phone conversation between the New York Fed
analyst Fabiola Ravazzolo and an
unidentified Barclays’ executive did. Indeed, the Barclays
executive acknowledged that the bank
was not honestly reporting its borrowing costs. In the following
conversation, “FR” indicates the
Federal Reserve and “B” the unidentified Barclays official:
B: We were putting in where we really thought we would be
able to borrow cash
in the interbank market and it was
FR: Mm hmm.
26

“Text: Bob Diamond Letter to Andrew Tyrie,” Financial Times,
June 28, 2012,
http://www.ft.com/intl/cms/s/0/1734757a-c157-11e1-8179-
00144feabdc0.html#axzz2jnPjoZLm (November 5,
2013).
27
28
PLC,” op. cit., Paragraph 2.
29
Chris Isidore, “Barclays admitted false LIBOR reports to Fed
in ’08,” CNN Money, July 13, 2012,
http://money.cnn.com/2012/07/13/investing/geithner-libor-
barclays/index.htm (September 19, 2013).
http://www.newyorkfed.org/newsevents/news/markets/2012/libo
r/April_11_2008_transcript.pdf#page=7

r/April_11_2008_transcript.pdf#page=7
http://www.ft.com/intl/cms/s/0/1734757a-c157-11e1-8179-
00144feabdc0.html#axzz2jnPjoZLm
http://money.cnn.com/2012/07/13/investing/geithner-libor-
barclays/index.htm
p. 8
B: Above where everyone else was publishing rates.
FR: Mm hmm.
B: And the next thing we knew, there was um, an article in the
Financial Times,
charting our LIBOR contributions and comparing it with other
banks and
inferring that this meant that we had a problem raising cash in
the interbank
market.
FR: Yeah.
B: And um, our share price went down.
FR: Yes.
B: So it’s never supposed to be the prerogative of a, a money

market dealer to
affect their company share value.
FR: Okay.
B: And so we just fit in with the rest of the crowd, if you like.
FR: Okay.
B: So, we know that we’re not posting um, an honest LIBOR.
FR: Okay.
30
According to a press release by the New York Fed,
“Immediately following this call, the analyst
notified senior management in the Markets Group that a contact
at Barclays had stated that
underreporting of LIBOR was prevalent in the market, and had
occurred at Barclays.”
31
On June
1, 2008, New York Fed President Timothy Geithner sent a
memorandum to Mervyn King, the
Governor of the Bank of England, on “Recommendations for
Enhancing the Credibility of
LIBOR,” one section of which was entitled “Eliminate incentive

to misreport.” This
memorandum was forwarded to the BBA.
British regulators also received information directly from
Barclays. On April 17, 2008, a
Barclays manager who was participating in a liquidity call with
the FSA made comments that
seemed to reveal the bank had been understating its LIBOR
submissions:
…we did stick our head above the parapet last year, got it shot
off, and put it back
down again. So, to the extent that, um, the LIBORs have been
understated, are we
guilty of being part of the pack? You could say we are. We’ve
always been at the
top end and therefore one of the four banks that’s been
eliminated. Um, so I
would, I would sort of express us maybe as not clean clean, but
clean in
principle.
32
Following Government Orders?

A third period of LIBOR manipulation arguably began on
October 29, 2008, when Bob Diamond
received a phone call from Paul Tucker, the deputy governor of
the Bank of England. Diamond
took notes on the call and circulated these by e-mail to John
Varley, who was then Barclays
CEO, and Jerry del Missier, then president of Barclays Capital.
The e-mail read:
30
New York Federal Reserve Bank, “Unofficial Transcript,”
April 11, 2008,
r/April_11_2008_transcript.pdf, p. 5-6 (September
19, 2013).
31
32
PLC,” op. cit., Paragraph 131.

r/April_11_2008_transcript.pdf
p. 9
Further to our last call, Mr. Tucker reiterated that he had
received calls from a
number of senior figures within Whitehall [i.e., the government]
to question why
Barclays was always toward the top end of the Libor pricing… I
asked if he could
relay the reality, that not all banks were providing quotes at the
levels that
represented real transactions, his response “oh, that would be
worse…”
Mr. Tucker stated the level of calls he was receiving from
Whitehall were ‘senior’

and that while he was certain we did not need advice, that it did
not always need
to be the case that we appeared as high as we have recently.
33
Diamond also spoke by phone with del Missier. According to
del Missier, Diamond said “the
Bank of England was getting pressure from Whitehall around
Barclays—the health of
Barclays—as a result of LIBOR rates, that we should get our
LIBOR rates down, and that we
should not be outliers.”
Del Missier testified that he perceived this to be an instruction,
which he in turn relayed to
Barclays’ money markets desk. Diamond, however, testified
that he did not believe the phone
call from Tucker had been an “instruction” to lower Barclays’
LIBOR submissions and that there
had been “a misunderstanding, or a miscommunication” that had
led del Missier to interpret it as
such.
34

Although Diamond evidently considered this post-phone call
period to be a third, and
distinct, period of LIBOR manipulation, for which government
officials were at least partially
responsible, the U.K. Treasury Committee did not accept this
interpretation. It concluded that:
The Committee found Mr. Diamond’s attempt to subdivide the
later period of
wrongdoing neither relevant nor convincing. It does not appear
that the
conversation between Mr. Tucker and Mr. Diamond made a
fundamental
difference to Barclays’ behavior, given the repeated instances of
‘low-balling’
submissions to the LIBOR fixing process by
Barclays….covering the year
running up to the phone call between Mr. Tucker and Mr.
Diamond.
35
WHO BENEFITED AT WHOSE EXPENSE
In a July 2, 2012, memo to Barclays’ staff, Diamond addressed
the question of impact. He wrote:

Our customers and clients are particularly concerned about the
potential impact of
this behavior on them. Let me be clear: it does not matter if this
was perpetrated
by one individual or a handful—it was wrong.
But we must help our customers and clients recognize that on
the majority of
days, no requests were made at all. Even when made, the
requests were not
33
34
35

p. 10
always accepted by the submitter, and the attempted
adjustments were, on
average, small, typically less than one basis point.
When the ultimate rate was affected is a complex question,
especially given the
role of the other banks’ submissions. This helps explain why the
Department of
Justice concluded that the rate was affected only on “some

occasions.”
36
Regarding the first phase of manipulation, Diamond insisted
that participating traders were not
acting on behalf of Barclays when they submitted rates that
would benefit their books. He told a
member of the Treasury Committee, “You said that the traders
were acting on behalf of
Barclays. They were acting on behalf of themselves. It is
unclear whether it benefited Barclays
but I don’t think they had any interest in benefiting Barclays,
they were benefiting themselves.”
37
The chairman of Britain’s FSA, Lord Turner, testified that it
would be difficult—albeit not
impossible—to prove whether individual traders had benefitted
from the rate-rigging. “That
would be a very complicated thing to do,” he said, “because you
would have to work out what
they would have put in when they did not put this in, and then
you have to work out what that
would have done to the average.”

38
In relation to the second phase, Diamond stressed in his letter to
the Treasury Committee that,
“the authorities found that Barclays reduced its LIBOR
submissions to protect the reputation of
the bank from negative speculation during periods of acute
market stress.”
39
He emphasized that
speculation regarding Barclays’ liquidity was “unwarranted,”
“inaccurate,” and “created a real
and material risk that the bank and its shareholders would suffer
damage.” He concluded: “Even
taking into account of the abnormal market conditions at the
height of the financial crisis, and
that the motivation was to protect the bank, not to influence the
ultimate rate, I accept that the
decision to lower submissions was wrong.”
AFFIXING BLAME
There are many different viewpoints as to who—or what—is
ultimately responsible for the

LIBOR scandal.
According to an external review commissioned by Barclays, the
culture of the investment
banking division placed a strong emphasis on delivering
desirable results. “Many of our
interviewees told us,” the report said, “that while some
members of Barclays Capital’s
top team inspired and valued loyalty, the team disliked bad
news. This all combined to create an
36
“Bob Diamond’s memo to Barclays’ staff,” The Guardian, July
2, 2012,
http://www.guardian.co.uk/business/2012/jul/02/bob-diamond-
memo-to-barclays-staff (September 20, 2013).
37
38

mtreasy/481/48104.htm#n35 (September 19, 2013).
39
House of Commons Treasury Committee, “Fixing Libor:
Written Evidence,”(Letter to the Chairman from Bob
Diamond, Chief Executive, Barclays, June 28, 2012)
http://www.parliament.uk/documents/commons-
committees/treasury/Fixing%20LIBOR%20evidence%202.pdf
http://www.guardian.co.uk/business/2012/jul/0 2/bob-diamond-
memo-to-barclays-staff
mtreasy/481/48104.htm#n35
http://www.parliament.uk/documents/commons-
committees/treasury/Fixing%20LIBOR%20evidence%202.pdf
p. 11
environment in which leaders were rarely effectively tested or

challenged, contributing to a sense
of ambiguity about what was considered right and wrong.”
40
Diamond, in his memo to Barclays’ staff, said “The events
revealed last week arose in large part
because we did not have appropriate controls in place. Frankly,
we misjudged the risk associated
with the underlying activity.”
41
In his testimony, former Barclays chairman Marcus Agius
emphasized that LIBOR submissions were long viewed as low -
risk because outliers were
removed and because the rate was historically quite stable.
42
The House of Commons Treasure Committee saw things quite
differently:
The attempted manipulation of Barclays’ LIBOR submissions
with the intention
of personal gain continued for four years. It is shocking that it
flourished for so

long. Any system may fail for a short period, but compliance at
Barclays was
persistently ineffective. Even when Barclays’ compliance had
indications that
something was awry, it failed to take the opportunity to
strengthen the bank’s
controls. Nor was there any pressure from senior executives
within Barclays to
ensure that effective LIBOR controls were in place... These are
serious failures of
governance within Barclays, for which the board is responsible.
43
In its own dissection of the scandal, the financial community
and press have put forth a variety of
explanations. Martin Wheatley, the top financial regulator in
Britain, argued that a code of
conduct with clear rules, overseen by a regulator with extensive
powers, would be sufficient to
correct the problem. The editors of Bloomberg blamed the
culture of finance and suggested the
key to changing this was aggressive prosecution of those who
had manipulated rates. Some
bankers suggested the scandal resulted from the actions of a few

bad individuals, and that once
these people were removed, the system would again function
smoothly. In contrast, financial
journalist Ian Fraser argued, “Many banks have sought to blame
LIBOR rigging on individual
‘rogue traders,’ many of whom have already been fired or
suspended. But there is strong
evidence to suggest that, in both phases of LIBOR rigging, the
traders were only obeying orders
from more senior investment banking colleagues.”
44
And James Surowiecki, writing in the New
Yorker, blamed pretty much everybody: “The most striking
thing about this scandal is that it was
predictable—the way LIBOR was designed practically invited
corruption—yet no one did
anything to stop it.”
45
40
Salz Review, “An Independent Review of Barclays’ Business
Practices, April 2013, Section 8.39,
https://www.salzreview.co.uk/c/document_library/get_file?uuid

=557994c9-9c7f-4037-887b-
8b5623bed25e&groupId=4705611 (September 19, 2013).
41
“Bob Diamond’s Memo to Barclays’ Staff,” The Guardian, July
2, 2012,
http://www.guardian.co.uk/business/2012/jul/02/bob-diamond-
memo-to-barclays-staff (September 20, 2013).
42
43
44
Jamie Mann, “Rate Rigging Traders to be ‘Scapegoats’ as
Arrests Imminent,” The Scottish Times, July 23, 2012,
http://www.scottishtimes.com/rate_rigging_traders_to_be_scape
goats_as_arrests_imminent (September 20, 2013).
45
James Surowiecki, “Bankers Gone Wild,” The New Yorker, July
30, 2012,

http://www.newyorker.com/talk/financial/2012/07/30/120730ta_
talk_surowiecki (September 20, 2013).
=557994c9-9c7f-4037-887b-8b5623bed25e&groupId=4705611
=557994c9-9c7f-4037-887b-8b5623bed25e&groupId=4705611
http://www.scottishtimes.com/rate_rigging_traders_to_be_scape
goats_as_arrests_imminent
http://www.newyorker.com/talk/financial/2012/07/30/120730ta_
talk_surowiecki
p. 12
In the wake of Barclays’ LIBOR settlement, Douglas Keenan, a
former trader at Morgan Stanley,
published an op-ed in the Financial Times in which he
suggested that misreporting of LIBOR
rates may have been common practice since 1991. “I talked
with some of my more experienced

colleagues about this,” Keenan wrote. “They told me banks
misreported the LIBOR rates in a
way that would generally bring them profits. I had been
unaware of that, as I was relatively new
to financial trading. My naivety seemed to be humorous to my
colleagues.”
46
AFTERMATH
Investigations into alleged manipulations of the LIBOR by other
banks continued after the
Barclays settlement. In December 2012, UBS agreed to pay a
$1.5 billion fine—the FSA
deemed UBS offenses “considerably more serious”
47
than Barclays’ offenses and two former
UBS traders were formally charged. In February 2013, Royal
Bank of Scotland was fined $612
million. As of autumn 2013, more than a dozen other banks
remained under investigation with
more charges, and settlements, expected to come.

Regulatory authority over the LIBOR was given to the U.K.’s
Financial Conduct Authority,
headed by Martin Wheatley, and the FSA was shut down.
Responsibility for setting the LIBOR
was taken from the BBA and awarded to NYSE Euronext.
48
While the LIBOR would continue to
be set by a surveyed panel of banks, Wheatley tasked Euronext
with finding a way to tie the rates
more closely to actual transactions. One possibility suggested
was the creation of two parallel
rates, one from surveys and the other transaction-based.
49
In February 2013, Antony Jenkins—Diamond’s successor as
Barclays CEO—told the
Parliamentary Commission on Banking Standards that he was
“shredding” Diamond’s legacy
and working to change Barclays “aggressive” and “self-serving”
culture.
50
In spring 2013,
Diamond was profiled in the New York Times Magazine. The
article, by Andrew Sorkin, called

Diamond’s role in the scandal “minimal, and perhaps wildly
overblown.”
51
In discussing the
LIBOR scandal, Diamond told Sorkin:
Do you want the truth? Up until all of this, I didn’t even know
the mechanics of
how Libor was set. If you asked me who at Barclays submitted
the rate every day,
46
Douglas Keenan, “My Thwarted Attempt to Tell of LIBOR
Shenanigans,” The Financial Times, July 26, 2012,
http://www.ft.com/intl/cms/s/0/dc5f49c2-d67b-11e1-ba60-
00144feabdc0.htm (September 20, 2013).
47
Jill Treanor, “Two Former UBS Employees Charged in US
Over LIBOR,” The Guardian, December 19, 2012,
http://www.theguardian.com/business/2012/dec/19/ubs-1bn-
libor-payments-to-brokers (September 20, 2013).
48
Brooke Masters and Philip Stafford, “Scandal-Plagued Libor
Moves to NYSE,” The Financial Times, July 9,

2013, http://www.ft.com/intl/cms/s/0/73332222-e87f-11e2-aead-
00144feabdc0.html#axzz2e2YlYvAh (September
20, 2013).
49
“Q&A What Next for LIBOR?” The Financial Times, July 9,
2013, http://www.ft.com/intl/cms/s/0/b861dc76-
e884-11e2-aead-00144feabdc0.html#axzz2e2YlYvAh
50
Martin Robinson, “Barclays will ‘shred’ Bob Diamond’s legacy
by slashing bonuses as it is forced to set aside
another £1bn for mis-selling scandals,” The Daily Mail,
February 5, 2013, http://www.dailymail.co.uk/news/article-
2273668/Barclays-shred-Bob-Diamonds-legacy-slash-bonuses-
forced-1bn-mis-selling.html (September 20, 2013).
51
Andrew Ross Sorkin, “Bob Diamond’s Next Life,” The New
York Times Magazine, May 2, 2013,
http://www.nytimes.com/2013/05/05/magazine/robert-diamonds-
next-life.html?pagewanted=all&_r=0 (September
20, 2013).

http://www.ft.com/intl/cms/s/0/dc5f49c2-d67b-11e1-ba60-
00144feabdc0.htm
http://www.theguardian.com/business/2012/dec/19/ubs-1bn-
libor-payments-to-brokers
http://www.ft.com/intl/cms/s/0/73332222-e87f-11e2-aead-
00144feabdc0.html#axzz2e2YlYvAh
http://www.ft.com/intl/cms/s/0/b861dc76-e884-11e2-aead-
http://www.ft.com/intl/cms/s/0/b861dc76-e884-11e2-aead-
http://www.dailymail.co.uk/news/article-2273668/Barclays-
shred-Bob-Diamonds-legacy-slash-bonuses-forced-1bn-mis-
selling.html
http://www.dailymail.co.uk/news/article-2273668/Barclays-
shred-Bob-Diamonds-legacy-slash-bonuses-forced-1bn-mis-
selling.html
http://www.nytimes.com/2013/05/05/magazine/robert-diamonds-
next-life.html?pagewanted=all&_r=0
p. 13
I wouldn’t be able to tell you. I bet you if you asked any chief
executive of any
bank on the street, they would give you the same answer.
52

Study Questions
1. What aspect of the first phase of LIBOR manipulation was
most ethically problematic:
submissions?
submitters to gain an unfair
advantage?
whose mortgages or
investments were tied to the LIBOR?
-rigging could undermine public trust
in LIBOR and other
cornerstones of the global financial system?
2. At least some Barclays traders had good reason to believe
that other banks were manipulating
LIBOR submissions in 2005-2006. How do you think this
affected the Barclays traders’
behavior? Does it affect your ethical assessment of their
behavior?
3. Who is responsible for compliance in an institution in which
executives pressure subordinates
to deliver results but don’t monitor their actions? What is the
role of corporate culture in
ensuring compliance? How should a company handle internal

whistleblowing?
4. Is there any ethical distinction between individual traders’
manipulation of the LIBOR and
banks’ systematic submission of unrealistically low rates during
the credit crisis? Why or why
not?
5. Does the fact that governments may have condoned, or even
encouraged, banks to understate
their LIBOR submissions in 2007-2008 affect your ethical
assessment of Barclays’ behavior
during the credit crisis?
6. Can you think of other examples (in finance or in other
industries) that mirror the LIBOR
case? What are the common features of LIBOR manipulation
and your example?
52
Ibid.

p. 14
Exhibit 1: LIBOR Manipulation in a “Plain-Vanilla” Interest
Rate Swap
This is a hypothetical example of a “plain vanilla” interest rate
swap for $4 billion in loans. It
explains the mechanics of how a Barclays trader could benefit
from LIBOR manipulation.
A Barclays trader and a Counterparty agree to a deal with the
following terms. At a specified
date in the future:
$4bn x (LIBOR - 4.8%).
can be either positive or
negative. Also note that in this example Barclays benefits from

a low LIBOR.
Now the date for the payments arrives. Suppose the other fifteen
banks submit the following
rates for the 3-month U.S. dollar LIBOR: 4.810, 4.810, 4.810,
4.810, 4.815, 4.815, 4.815, 4.815,
4.815, 4.820, 4.820, 4.820, 4.820, 4.820, 4.830.
When calculating the 3-month U.S. dollar LIBOR, the four
highest and four lowest submissions
are tossed out.
Suppose Barclays believes the accurate rate to submit is 4.820.
Barclays must pay $675,000 to
Counterparty.
25, so Barclays
must pay $ 650,000 to
Counterparty.
Barclays must pay $ 625,000 to
Counterparty.
additional effect on the LIBOR or
Barclays’s payments.

With collusion, the effect can be larger. For example, suppose
Barclays submits 4.810. Suppose
it also convinces two banks to submit 4.810 rather than 4.815
and convinces a third bank to
submit 4.810 rather than 4.820. Then the LIBOR is 4.813125
and Barclays only needs to pay
$525,000 to Counterparty.
p. 15
Exhibit 2: Barclays’ Head Over the Parapet
53
The blue line is Barclays’ 3-month U.S. dollar LIBOR
submission. The red line is the fix, or

reported LIBOR, based on all banks’ submissions. Light grey
lines are other individual banks’
submissions.
53
Simon Rogers, “Libor Rate Fixing: See Each Bank’s
Submissions,” The Guardian, July 3, 2012,
http://www.theguardian.com/news/datablog/interactive/2012/jul/
03/libor-rate-fixing-bank-submissions, (November
1, 2013). Reproduced with permission.
http://www.theguardian.com/news/datablog/interactive/2012/jul/
03/libor-rate-fixing-bank-submissions
6/27/22, 8:17 PM Preview Rubric: 4.2/7.2 Article (100 points) -
3SU2022 Craft Academic Writing for Bus (BADM-700-01A) -
Indiana Wesleyan University
https://brightspace.indwes.edu/d2l/lp/rubrics/preview.d2l?ou=16
5026&rubricId=518331&originTool=quicklinks 1/4

4.2/7.2 Article (100 points)
Course: 3SU2022 Craft Academic Writing for Bus (BADM-700-
01A)
Criteria Excellent Competent
Needs
Improvement
Inadequate/Faili
ng
Criterion Score
Quality of
Article
Content
/ 5050 points
Information in
the article is
comprehensive
, accurate, and
relevant,
includes details
to add interest,
provide

examples, and
demonstrate
objective,
critical
thinking.
24.5 points
Information in
the article is
accurate and
relevant,
includes
adequate
details and
examples, and
demonstrated
objective,
critical
thinking.

19 points
Information in
the article is
limited, but
accurate and
relevant,
includes
minimal details
and examples,
and
demonstrates
some
objective,
critical
thinking.
16.5 points
Information in
the article

does not meet
minimal
criteria for
accuracy,
detail, or
demonstration
of critical
thinking.
Needs
Improvement
Inadequate/Faili
ng
Criterion Score
Organization

of the Article
Content
/ 2020 points
The article is
organized
professionally
and effectively
and or
creatively with
inclusion of
the following:
Clear main
idea.
Logical
sequence of
topics.
Balanced
partition of

topics.
Use of
transitions and
summaries.
18 points
The article is
organized with
inclusion of
the following:
Clear main
idea.
Logical
sequence of
topics.
Balanced
partition of
topics.
Use of

transitions and
summaries.
16 points
The article
shows an
effort to be
organized, but
has some
disorganization
in the
following
areas:
Clear main
idea.
Logical
sequence of
topics.
Balanced

partition of
topics.
Use of
transitions and
summaries.
14 points
The article is
disorganized or
lacks cohesion,
flow, and
proportion in
the following
areas.
Clear main
idea.
Logical
sequence of
topics.

Balanced
partition of
topics.
Use of
transitions and
summaries.
Needs
Improvement
Inadequate/Faili
ng
Criterion Score
Written
Communicati
on

/ 2020 points
The article is
written
professionally
and exhibits
excellent
communication
when applying
English
Grammar
Standards and
the 7 C's of
writing: clear,
concise,
complete,
correct,
correlated to
the research,

creative, and
critical
thinking.
18 points
The article is
written
competently
and evidences
proficient
communication
when applying
English
Grammar
Standards and
the 7 C's of
writing: clear,
concise,
complete,

correct,
correlated to
the research,
creative, and
critical
thinking.
16 points
The article is
readable and
demonstrates
emergent
communication
skills that are
in need of
improvement
in the
application of
English

Grammar
Standards and
the 7 C's of
writing: clear,
concise,
complete,
correct,
correlated to
the research,
creative, and
critical
thinking.
14 points
The article is
inadequate
and has
substantial
deficiencies in

communication
in the
application of
English
Grammar
Standards and
the 7 C's of
writing: clear,
concise,
complete,
correct,
correlated to
the research,
creative, and
critical
thinking.

Total / 100
Overall Score
Needs
Improvement
Inadequate/Faili
ng
Criterion Score
APA
/ 1010 points
Excellent use
of APA
standards in
the format of
the document,
citations, and
references.

9 points
Proficient use
of APA
standards in
the format of
the document,
citations, and
references. A
few minor
errors are
present.
7 points
Needs
improvement
in the use of
APA standards
in the format
of the

document,
citations, and
references. A
number of
errors are
present.
6 points
Inadequate or
non-use of
APA standards
in the format
of the
document,
citations, and
references.
Several errors
exist and or
disregards

proper use
standards.
Excellent
92 points minimum
Competent
56 points minimum
Needs Improvement
49 points minimum
Inadequate/Failing
0 points minimum

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