Evidently the investigations into this sorry tale started some two years ago, and there may be many other banks and individuals involved. Without wishing to come over all sensationalist, the Barclays case is certainly only the tip of the iceberg.
But let's back up and try to describe exactly what was happening. The British Bankers Association has a system in place to fix the overnight interest rates for US dollars and pounds sterling. This is the 'London Interbank Offered Rate', or LIBOR. This was to set the rates at which banks lent money to each other.
For the dollar rate there are 18 banks on a panel that submit the rates every day for publication at 11.00 a.m. For sterling the panel is only 12 banks. Already you may ask why is it such a small sample when these markets are so vast ? For the Euro rate (EURIBOR) there are currently 40 banks who submit rates. The greater the number of banks, of course, the less chance there is for them to act in concert - like some cartel, or private club.
Now, you would think that something as important as this would only be signed off and overseen by the head of rates trading, or the treasurer or somebody important, but the reality is that the rate setting was often seen as a bit of a daily chore, and, as a result, you might get quite intermediate-grade rates traders given the responsibility.
These LIBOR rates have a massive impact on global funding and finances. The dollar LIBOR rate is actually used as the key reference for overnight rates and more in the United States. So any manipulation of the rate can impose a huge burden on millions of 'end users', as mortgage payments, corporate borrowing, secured loans, credit card payments are all impacted.
And the motivation of the traders who manipulated the rates ? Well, a small change in the rate can make a huge difference to profit and loss - and, you got it, bonuses!
Let me leave it at that for now, and give the last word to the FSA. Tracey McDermott, acting director of enforcement and financial crime at the City regulator, has said that a 'number of other significant cross-border investigations in this area' were underway involving other banks. 'The action against Barclays should leave firms in no doubt about the serious consequences of this type of failure'.
As for me, I really hope a lot of senior heads roll for this one.
image: © Bengt Nyman