ValueWalk's Raul Panganiban interviews Joseph Cioffi, Author of Credit Chronometer and Partner at Davis + Gilbert where he is Chair of the Insolvency, Creditor’s Rights & Financial Products Practice Group. In the interview, we discuss the findings of the 3rd Annual report. Q2 2021 hedge fund letters, conferences and more The following is a computer Read More
Over the years, the darkest time in the financial markets has been triggered by different events, but according to Grant Williams of Vulpes Invest, there has always been one common characteristic, Manipulation. This is one factor that has come to the limelight over the London Interbank Offered Rate (LIBOR) scandal. However, according to Williams, this practice has been there for years and has even been noted in several posts, as he quotes on his publication.
After highlighting several incidences in the past, Williams notes that there are no conspiracies because, it is hardly possible to hide manipulation. He says, “The very fact that these episodes were brought to light is always one of the main reasons that most people inherently disbelieve in conspiracy theories”, referring to several incidences where cases of manipulation have been uncovered.
Grant Williams believes that Barclays PLC (NYSE:BCS) (LON:BCS) is not the only culprit in the latest case of Libor manipulation. He also believes that there is no way this can be considered fraud. In his argument, he points out to several pieces of evidence, both from media and corporate leaders.
Firstly, he refers to a context that theoretically explains the process of coming up with the daily Libor, a scenario that exhibits ultimate confidentiality between the sixteen participating banks. Williams notes that the facilitators of the process have the utmost respect to whatever rate a bank quotes.
The resulting figure after undertaking various metrics, is what for many, becomes the benchmark rate. The U.K based rate is one of the most important in that respect, and banks from round the world use it in determining their own lending rates.
Additionally, quoting a post from The Guardian, he points out that the culprits could indeed be charged with serious criminal offenses; Barclays has already been fined £290 million, becoming the first of the giant banks to come under media pressure.
In another reference post, (Financial Times), a treasurer of one of the largest city banks is quoted complaining that the Libor shown on the screens is always different from the effective one, labeling it, a fictitious rate. This observation is noted by another senior banker, who claims that bankers always quote a different rate to the one showing on the screens.
The writer also references a post in The Economist, which claims that the Financial Services Authority (FSA), identified price-rigging dating back to 2005, while some current and former traders point as far back as 15 years ago in reference to Libor manipulation/rigging. The Economist quotes someone noticing “odd fixing” as far back as the 1980s.
It is also notes that Barclays PLC along with many other banks intentionally lowered borrowing rates for a period of two years, from 2007, which stretched to the middle of the global financial crises. The rates were 40-60 basis points lower.
The full article on the topic can be found here