provide figures that would benefit the traders, instead of submitting the rates the bank would actually pay to borrow money (New York Times, 2012). On the other hand, manipulations occurred between other counterparties – where external traders across different banking institutes would cooperate to fix the LIBOR.
Ultimately, Traders at these top Banking firms were conspiring to distort the LIBOR rates because of their excitement in enduring elevated profits. Traders would capitalise off these manipulations by marking their positions on the spread between different LIBOR Benchmarks, in numerous time frames (Liam Vaughan, 2017). For example, the three-month Euro and the three-month EURIBOR or comparing the three-month TIBOR to a six-month TIBOR. They would also exploit different trading positions and submissions that other companies would make. Banks like Barclays followed suite of the LIBOR distortion. They submitted falsified data after the 2007-08 Financial Crisis, by deflating (having lower) borrowing costs compared to their actual value. Not only did this occur because banks wanted to avoid revealing their financial instability to the world, but they also aimed to protect themselves, during and after a time of major financial crisis. As LIBOR became easy to manipulate, banks had the incentive to alter their data because of the fear of losing out on positions worth trillions of pounds. However, this implies the senior management of these banks were aware of LIBOR rigging, as they were the most knowledgeable on the firm’s market position. This is implicated through the resignation of Banking leaders involved in collusion, including Former Barclays Chief Executive, Bob Diamond.
Proof that these manipulations were occurring was evident through a humiliating bundle of emails and conversations between Bank Staff, released by UK and US Regulators. On 26 October 2006, an external trader made a request for a lower three-month US dollar LIBOR submission – The external trader stated in an email to Trader G at Barclays “If it comes in unchanged I’m a dead man”, which Trader G responded that he would “have a chat” (Telegraph, 2012). As a result, the three-month US LIBOR was reduced that day, as requested by the external trader. Such emails and messages illustrate how traders explicitly inform submitters and other traders to alter the data, for the benefit of their own and the bank.
LIBOR was also manipulated because there was no regulatory pressure or any form of governmental intervention from lawmakers or the Central Banks. As LIBOR being determined by a selection of highly rated banks, the ease of LIBOR manipulation was due to restrictions not being imposed by governments. However, it can be argued that the Government’s and Central Banks, such as the Bank of England and the Federal Reser