10 QUESTIONS about Libor scandal
The Libor scandal, the banking sector after the financial crisis back to its foundations shake. What is ‘Liborgate’, why is the rate so important and what effect it has on individuals and businesses? Explained below using the answers to 10 questions.
2. When is Libor arise?
Libor in the eighties. Banks sought a uniform interest rate to charge to bring a large number of loans. This brought an end to the time-consuming and sometimes difficult negotiations that often preceded it.
3. Why banks lend to each other?
Banks lend to each other to each other to fill shortages and surpluses that arise because on certain days more / less borrowing and savings than expected. Banks with surplus cash earn money there, while banks with deficits that can quickly eliminate.
4. How is the interest rate calculated?
Interest is calculated every morning a statement of 16 international banks, indicating what interest they have to pay to borrow money. The four highest and lowest percentages fall off and on the basis of the average of the eight remaining rates, the Libor rate of that day determined.
5. Why is the rate so important?
Libor has in recent decades become one of the key interest rates in the financial world. Daily for tens of billions of euros by companies and financial institutions borrowed and lent on the basis of the Libor. It is also an important indicator for the daily interest, which the ECB, Fed and other central banks apply.
6. Has Libor affect my mortgage or business loan?
In part. For most mortgages only mentions an indirect effect and the interest not Libor calculated. But the Libor rate that banks charge each other has ultimately affect the mortgage rates are calculated. Also in business loan is the height of the Libor rate of interest.
7. What is a scandal arise?
For Barclays and probably other to the panel member banks since 2005 there have been misled by the daily fixing of rates. These would sometimes deliberately too high passed to additional profit. At the time of the financial crisis were deliberately kept lower rates to declining confidence in the banking sector to cover. When Barclays was the top of the bank at the height of Liborgate.
8. Abuses which have impact on me personally?
Higher or lower interest rates have a direct impact on citizens and businesses whose mortgages and loans through manipulation (slightly) higher or lower than they should be able to fall.
9. How Rabobank involved in the scandal hit?
Rabobank is one of the banks participating in the panel. Meanwhile there are several studies on the possible involvement of the bank in the scandal, while legal claims be prepared. Rabobank shrouded in silence on the issue, but would allegedly have some employees have put on a siding.
10. What are the next steps?
In Britain have been announced to the possibility of manipulation of the Libor to eradicate. In addition, following the coming months and years probably still a large number of legal proceedings and possible penalties for the banks involved. Barclays has been fined, while Rabobank and many other participating banks through judicial and financial regulators under the microscope are taken.