Question

1. What is the so-called Libor?

2. Name the banks that were being investigated by the CFTC and FCA. Why they were investigated?

3. What did trades at these banks do about Libor in spring 2008?

Answer 1

1. Libor stands for London interbank offered rate. The interest rate at which banks offer to lend funds (wholesale money) to one another in the international interbank market.

Libor is a key benchmark rate that reflects how much it costs banks to borrow from each other.

2. The five firms were Citibank, NA, HSBC Bank plc, JPMorgan Chase Bank, NA, Royal Bank of Scotland plc, and UBS AG

3. traders openly asked others to set rates at a specific amount so that a position would be profitable. Regulators in both the United States and United Kingdom levied ~$9 billion of dollars in fines on banks involved in the scandal, as well as a slew of criminal charges. Because LIBOR is used in the pricing of many financial instruments, corporations and governments have also filed lawsuits, alleging that the rate fixing negatively affected them.