On 5 July 2012 00:58, Frederick Noronha <[email protected]> wrote: > Billions, Diamond and Barclays > http://www.aljazeera.com/news/europe/2012/07/201274155043111527.html >
COMMENT: LIBOR Stands for London interbank offered rate. Literally means that and now what is now being put forward as the rate at which the bank can borrow is wrong. Every morning just before 11 am some one phones the Banks to ask what is the LIBOR - offered rates in a specific currency. I worked for an American Bank and they only asked us for our Euro dollar rates ( US Dollars traded in Europe) We quoted the rates at which we would lend in the various periods from 1 month to 1 year, to a prime Bank counterpart. I have a feeling that Barclays were quoting a higher lending rate at the time of the troubles in 2008 as they were having difficulties obtaining funds. I distinctly remember during the turmoil that twice HSBC had not processed the money that Barclays had borrowed. It it quite probable that the B of E was concerned that such a big Bank was quoting high lending rates at the time; implying that they had to pay more for their own funding. So it is quote conceivable that the B of E and the Treasury (Labour Government at that time) nudged Barclays to lower their rates to avert a catastrophe in the ensuing turmoil. On the issue of quoting lower interest rates - everyone including jack the lad - would have a happy smile...but perhaps not that much, as what is quoted in the interbank market is not what the ordinary person on the street sees! Many International Loans are based on LIBOR. Corporations the World over use this for their funding, Typically a syndicate of Banks would lend at a specific rate plus 1/4 % for a good Prime Corporate. They then put out an announcement in Financial Magazines and put out what is known as a tombstone. The Politicians now are braying for blood; they don't understand how much damage they are doing to an already fragile Banking system. If Barclays was then quoting lower rates then all should be happy! The beauty of the system is that the two highest quoted rates and the two lowest are kicked out, then an average compiled of the rest. So I fail to see any damage done and indeed I am perplexed that Barclays had to cough up 500 million in fines. -- DEV BOREM KORUM Gabe Menezes.
