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GROUP #: 5

MEMBERS #: 47713, 00000, 00000, 00000, 00000

PROGRAM: MBA29

COURSE: FINANCE IN INTERNATIONAL MARKETS

INSTRUCTOR: PROF. LUC KEULENEER

GROUP PAPER: WHAT WENT WRONG WITH LIBOR RATES?

“Honesty is a very expensive gift. Do not expect it from cheap people” Warren Buffet

Table of Contents

Introduction 2

History 2

Origen of the crisis 3

Probable Reasons for the LIBOR manipulation 5

Main players involved in the LIBOR scheme 6

Recommendations on what to do to avoid this problem 6

Reference List 8

What when wrong with LIBOR rates?
Metz, and Seow, 2012. p. 137). The scheme consisted in artificially inflate or deflate the quotes to profit and to instill a deceitful impression of solvency (Choy, Ping Shung, and Chng, 2012. p. 3).

Two facts contributed to facilitate the crisis. First, since the financial crisis began in 2007 the interbank market had decreased remarkably, and therefore, several banks were anxious for funds; however, they tried to hide this reality and hence submitted lower quotes than the real ones (Abrantes-Merz, Kraten, D. Metz, and Seow, 2012 p. 138). Second that there was total dependence on specialist’s decision on the part of submitter when setting their LIBOR proposals (Garcia, 2012, p. 1). The BOE trusted totally in the quotes submitted for the respective specialists of the panel member contributor banks.

One surreptitious element, mostly overlooked, by the media is the ethical code of conduct of the authorities of the financial institutions involved in this scheme. Is the lack of social and moral concern a weakness of the Management and Finance schools and universities? Has the education system underestimated the importance of instilling a pervasive code of conduct morale on the higher education programs? A survey showed that 26% of