Barclays-Libor Scandal Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Barclays-Lib or Scandal Case Solution

Who is hurt and who benefits from the manipulation of LIB OR?

The Barclays along with 20 other banks, manipulated the borrowing rates in order to gauge more profits. Under such circumstances and the manipulation of the rates, the bank especially the Barclays received maximum benefit because it gauged the profits from the already made swaps, contacts and derivatives which were set on the previous set Labor rates, hence offered a great profit margin. Basically Barclays did two type of manipulation by reducing the rate, one trading based manipulation which purely benefited Barclays in terms of revenues and profits derived from ongoing contracts and swap agreement. Moreover, it helped in maintaining the reputation of bank as healthy institution which it was not under the financial crisis, making more investment flows to the bank and eliminating the risk of “run on Bank”. The party which gets most effected by the manipulation were the traders and the local investors who had been in contract with the bank under swap and derivatives agreements. The traders and local investors, under such low rates,received less profits on maturity as calculated in the early years when entering the contract with the bank.

The incident had also a bad impact on the external financial market which questioned the credibility of the LIB OR rates, thus making the circumstances complex for regulatory authorities to sustain the credibility of the rates.

Who was most responsible for the manipulation of LIB OR?

The LIB OR conspiracy has been identified as the smartest and epic in scale in the history of banking. It involved the people who have been involved with the most powerful bank of the world. If we analyze deeply, the conspiracy of lib or appears to have involved not only one participant-Barclays, but the entire school of big fishes- Other banks, to make it succeed. Under the most specific terms, Barclays along with 20 other banks had been responsible for the manipulation of Lib or rates. These banks collectively lowered the rates of borrowing and trading due to which the ultimate average rate of the market-Lib or got low, profiting the banks and making loss to the investors who have invested in these banks through swaps and derivatives options.

Barclays-Libor Scandal Harvard Case Solution & Analysis

However, the other banks in the market conspired on the submission and then fines were imposed on the banks for manipulating the Lib or rates which disturbed the market equilibrium.It also effected the portfolios and investment structures of many banks which caused the phenomenon “run on Bank “causing bankruptcy to many banks thus accumulating in the financial crisis of US and Europe.............

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Barclays-Libor Scandal Harvard Case Solution & Analysis