This opens up an interesting discussion about what might replace it and who will be responsible for overseeing LIBOR. Will the UK government regulate it? Will they follow the European example with how EURIBOR is set?
For some background on what the Libor manipulation scandal is about check out some of the earlier threads on WSO here. It's the usual Monkey Business. In a nutshell the banks have been manipulating the rate so they can profit from trades on the index. (LIBOR underpins billions of dollars in loans and trillions in derivative contracts globally).
"We're clean, but we're dirty-clean, rather than clean-clean," the executive told an unnamed BBA manager, who responded, "No one's clean-clean." -- Quote from the Reuters article
Barclays have recently paid GBP 290 million to settle a case against them in this regard. Maybe there will be more fines for other banks.
It will be interesting to see how Lie-Bor will be reformed or if it will be replaced by a new index. Some have suggested that a transactions index based on actual lending rather than quotes would avoid manipulations. Will the government regulate it to avoid fraud and provide transparency? Should it?
Have you noticed the 1 month LIBOR forward curve has been getting flatter and flatter? Pretty soon it will just be a straight line.
I don't feel confident that replacing LIBOR with whatever index will necessarily make the financial system any more transparent or any less corrupt. I honestly have run out of energy to even give a fuck nowadays.
It is all about some people within institutions (banks, or whatever) gaming whatever set of rules exist to make a profit out of greed. It is tiresome and demoralising. Try explaining to your clients all about these scandals, while making a statement that you are working honestly for his best interest in whatever transaction you are proposing...
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