Libor Scandal: Barclays Just One of Sixteen Banks
Barclays is reeling from the news that there may have been some collusion between the money market desk and the swaps desks over the fixing of the Libor rates.
The press and politicians will welcome the opportunity to have another go at the financial sector.
The fact is that Barclays was one of sixteen banks from which the BBA took the average of the middle eight Libor
quotes. In addition, the net effect of their machinations was to fractionally 'lower the cost of borrowing'.
However, these points will be lost in the politicians' relief that there is someone else to shove the spotlight on to.
It must be remembered that for every swap there is a counterparty, which is generally another financial institution, and banks do not run enormous exposure on swap books.
So when journalists talk about massive swap/lending volumes, most of this has an equal and opposite component as the banks must cover every loan.
The fines from the regulators can be assumed to be much more than the actual benefit to Barclays over the four/five year period.
In fact, by reinforcing the appearance of stability in 2007/08, Barclays and others probably did rather more to save the financial system from total disaster than the various Central Banks have managed since then.
Of course this probably won't stop a court in the States awarding mind-boggling sums to a few of the class action lawsuits going on at the moment.
However, the financial markets seem to be confident that this storm that can be weathered as the Barclays share price has not tumbled following the headlines.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
By Simon Denham, 28 June 2012