2012 Libor Scandal

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Libor is a key determinant of global interest rates. This number touches about $500 trillion of transactions. Global banks submit their Libor "fixing". The Libor rate represents what it would cost for them to borrow a reasonably large sum of money on that day.

Barclays paid huge fines to Commodities Futures Trading Commission and U.K. regulators in the Libor episode.

It appears that regulators have evidence that allegedly show Barclays traders colluding with other traders in an attempt to rig Libor to benefit their derivatives trades. The information in their hand also appears to show that during the financial crisis Barlcays attempted to ease fears of regulators and markets about its financial health by submitting Libor numbers that intentionally understated the bank's borrowing costs.

While fines are a common form of punishment awarded to companies, it appears that CFTC and the Securities and Exchange Commission cannot press criminal charges on Barclays or its executives. Or isn't it so?

Experts feel that US Securities Law does not allow these type of activities as criminal activities. They are merely civil violations. Thanks to the Enron Scandal, there are some changes made and the Sarbanes-Oxley Act of 2002 incorporated certain criminal sanctions under securities laws. A more general but powerful criminal fraud provision does exist that can cover almost any act of deception that might affect the price of the security of a public company.

The United States Code Title 18, Securities Exchange Act of 1934 and Sherman Antitrust Act are worth reading.