I have said it so many times in the past eight years, but I will repeat myself – “LIBOR IS NOT AN EXACT SCIENCE – NEVER HAS BEEN, NEVER WILL BE! THE IDEA THAT A TRADE ASSOCIATION (BBA) SHOULD BE RESPONSIBLE FOR PRICING £500 TRILLION DOLLARS OF LOANS IS LUDICROUS & PREPOSTEROUS!” I have nothing against this august body. It does a great job, but the responsibility for delivering a full reflection of the cost of money from a compendium of banks – 7-14 banks putting their assessment for each loan period is too onerous and absolutely unrealistic. In 2008/9 wholesale money markets were moribund – hence pricing the cost of money was irrelevant.
The revelations by the BBC that the BOE may have suggested that banks and Barclays specifically should try and keep LIBOR as low as possible at a time of great financial crisis comes as no surprise to me at all. I feel that in the circumstances that these comments were made in the national interest. It just goes to further illustrate that LIBOR was not only flawed but also outdated a facility to price the cost of gargantuan sums of money. Thank goodness the system has been changed and further changes will be implemented by the Bank of England and the FCA.
Some people have gone to jail for LIBOR misdemeanours – Tom Hayes of Citibank for 11 years. Two from Barclays are behind bars. Two from Barclays were found not guilty at a retrial last week and staff members from ICAP were found not guilty. This whole episode has been very unsavoury. We need a full inquiry. No one condones criminal behaviour but some of the sentences look not only harsh but inconsistent in the circumstances!