LIBOR Scandal to go Global

The LIBOR scandal that hit Barclays could be about to go global, it is already known that many major financial institutions are under investigation over falsely influencing LIBOR. In America, JP Morgan Chase, Citi Group and Bank of America are all under investigation for it. It is believed that the fines levied at Barclays could be dwarfed by those levelled on these institutions, and other banks under investigation.

But the major problem for the banks might not be the fines themselves, Barclays’ fine of £270 million could be made back in a matter of weeks. Firstly the banking sector will take a massive nosedive in public trust and confidence, still recovering from the 2008 crisis. More worryingly for the banks could be the lawsuits arising from the scandal, many people’s loans and complex financial arrangements could have been badly affected by the rate fixing and as result could be eligible to sue the banks.

Professor of finance at Stanford University’s Business School believes that lawsuits arising from the LIBOR scandal could cost the banks billions of pounds, perhaps tens of billions of pounds! This would completely dwarf the payments made over PPI.

Another major problem for the banks will be the devastation to their top staff, at Barclays three major executives at the bank have lost their jobs, chief operating officer, Jerry Del Missier, Chairman, Marcus Agius and CEO Bob Diamond. If this spreads to other institutions the whole top class of bankers will vanish almost instantly. Personally, I won’t miss them. Although the banks might.

Although it is very difficult to predict what will be the outcome, considering that Barclays is the only bank that has confessed to any wrongdoing. The outcome has already been seismic here in the UK, if it spreads to German, Swiss and American banks, this will be the Banking Crisis Mark II.