Reference no: EM132425070

Barclays and the LIBOR Scandal

A. Background/Situation

1. Between 2005 and 2009, Barclays manipulated LIBOR to limit losses and/or gain profits from derivative trades. Furthermore, during the financial crises of 2007-2009, Barclays had dishonestly made low LIBOR submission rates in order to dampen market speculation and diminish negative media comments regarding the viability of the firm during the period.

2. The principles figures in the scandal were primarily Barclays' senior managers including Robert Diamond, who was then serving as the CEO of the firm, Marcus Agius who served as Chairman, and Jerry Del Missier who was the chief operating officer

B. What were the ethical issues relevant to the situation?

1. A number of ethical issues were relevant to Barclays and the LIBOR scandal. The attempts to rig LIBOR through benchmarking the interest rate indicated a culture of casual dishonesty and lack of accountability particularly on the chief executives at Barclays. Since many financial instruments including interest rate derivatives and housing loans depend upon LIBOR as the fundamental rate, the manipulation of the rate benefits the traders or banks involved directly with the manipulation and end up hurting consumers as well as financial markets in general. This contradicts the ethical principle of beneficence that cans on actors to act in the best interest of all and minimize harm.

C. Were there any laws broken ... or bent?

1. In this case involving Barclays and the LIBOR scandal, various regulatory infractions occurred. Barclays Bank traders indeed colluded with other traders in a bid to rig LIBOR in such a way that it would benefit their derivatives trades. The settlement by the bank, which amounted to $450 million, makes it clear that regulators have sufficient evidence to prove that Barclays broke the law. Barclays further submitted LIBOR numbers that understated the borrowing costs of the firm intentionally, which is a major violation of financial reporting laws.

D. What was the outcome?

1. Within a few days after the settlement, Robert Diamond who had served as the CEO of Barclays resigned under mounting pressure from British regulators. He nonetheless continued to deny any personal wrongdoing, claiming instead that a small number of Barclays employees were to blame for the LIBOR rate violations. Agius and Missier similarly resigned from their positions.

2. Barclays appointed a new Chief Executive Officer, Antony Jenkins, who declared that his main priority would be repairing the damaged reputation of the Bank. CEO Jenkins issued a press release in February 2013 that indicated Barclays Bank was going to review all aspects of their operations including embedding values and purpose across the company publishing an annual scorecard assessing performance, and improving transparency and disclosure around financial performance.

E. Lessons Learned

1. From a personal standpoint, the case has highlighted the need to conduct oneself with integrity and professionalism especially when acting in senior leadership positions. I have learned that failure to have a strong moral compass can have detrimental effects not only to my personal dignity but also to the corporation that I serve.

Attachment:- Example of Outlining for Research Paper.rar