It may seem like just another obscure banking scandal at a 322-year-old British bank, but there are a number of good reasons why you should care about the LIBOR rate-rigging scandal now roiling the world’s biggest and most powerful banks, including that it probably cost you money if you own a mortgage.
In late June, Barclays paid $453 million to regulators in the U.K and the U.S. to settle accusations that it had tried to influence LIBOR, or the London interbank offered rate — a benchmark interest rate that affects the price at which consumers and companies across the world borrow funds.
The rate, which is fixed via a poll of banks by the British Bankers’ Association, an industry group in London, is the benchmark for setting payments on some $360 trillion worth of financialinstruments, ranging from credit cards to more complex derivatives, such as futures contracts.
The potential scope of the unfolding scandal, now acquiring global significance, is enormous. Other banks that have disclosed that they are under investigation for LIBOR manipulation include big U.S. banks, such as Citigroup and JPMorgan Chase, and also HSBC, Deutsche Bank and the Royal Bank of Scotland.