The aim of such request was to ensure that the derivatives of Barclays Bank that were being traded at that time do not make any losses. Te investigators also realized that Barclays got into the manipulation to save face in the wake of a financial distress it was undergoing (Giroux 2013, pFollowing this request, te other bank within the panel joined manipulation of the LIBOR rates begun. A enquiry into this practice was put up developing a number of recommendations to regulate the sector. Anew institution was enacted to the initial regulating authority and legislations that provided for tighter control of the same.
I the interbank market, te LIBOR is the mean rate at which these banks can offer each other money. Tis borrowing is usually in the form of unsecured loans. I is often calculated from a selected number of banks known as panel banks. Te panel banks are usually selected by ICE Benchmark Administration and the Foreign Exchange and Money Markets Committee on a yearly basis. Snce the rates are given for different currencies, tere is panel set up to calculate the rates for each currency.
Te major currencies involved in this calculation include the sterling pound, te US dollar and the Japanese Yen. Ech panel consists of a number of experts drawn from different banks and consists of at least eight to 16 members. Tis is seen as a representative of the London money market (Raskin and Cheun 2008 p. Te banks that are selected to join this panel are selected based on strict criteria set by the administration of LIBOR. Te criteria include banks reputation, te market volume and the knowledge of the currencies operated under LIBOR.
Te concept of bank’s reputation is based majorly on the compliance to the law. Ofences like association with money laundering or rigging of interest rates damage the reputation of banks and shows that these banks are not law compliant. I this case, te compliance to the law means that the likelihood of scandals to occur is limited due to the high level of discipline. Aother perspective that will lead to a high reputation of a institution is the capital strength.
I this perspective, sand-alone banks do not score since their capitalization is limited (Barnett and Pollock, 2012, p286). Odinarily interest is a product of the bank loan and the amount of the interest rate. Hwever, i calculating the interbank interest income, te banks market share...
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