On June 28, 2012, Barclays, the United Kingdom’s second largest bank by assets admitted to a claim by the authorities that it manipulated borrowing cost from 2005 to 2009 and agreed to pay a fine of $455 million to U.K. and U.S. authorities to settle charges. Barclays sets the London interbank offered rate commonly known as “Libor” which is the benchmark rate that banks charge to each other for borrowing. The borrowing rates including mortgages and credit cards all around the world are based on Libor and it affects all borrowers worldwide.
The Chairman and the CEO of Barclays subsequently resigned from the bank; however, the Chairman will stay until a new CEO is selected. Now the regulators are scrutinizing the activities of other banks including the Citigroup, Deutsche Bank, HSBC Holdings, and UBS.
The documents obtained by the regulators reveals that bank traders and senior bank officials were involved in the scandal. Libor sets the borrowing rates every day morning and mortgage and other rates worldwide are based on the Libor that affects everyone. As a result of the uncovering of the scandal, now there is a push to scrap Libor and establish a benchmark using data from actual loans.