In The Banking World, Governance Is Key
An Phung is a multimedia journalist based in New York City. She has contributed to NYTimes.com, Patch.com and City Limits. She also spent time reporting in Indonesia where she covered stories about the country's growing illicit drug trade. An graduated from CUNY Graduate School of Journalism with a concentration in international reporting.
Follow me on Twitter @anhaiphung
What is the Big Idea?
The LIBOR scandal may be breaking now, but industry insiders told The Economist that the rate fixing goes back much further than that.
“Fifteen years ago the word was that LIBOR was being rigged,” says one industry veteran involved in the LIBOR process.
Barclays agreed to pay $453 million to U.S. and British authorities to settle allegations that it rigged key interbank lending rates, or the London Inter-bank Offering Rate (LIBOR) and a separate Euribor rate, by manipulating its reported rates in submissions to the British Bankers Association, which calculated the benchmark figures.
The investigation, which could cost several banks billions of dollars, has already claimed Barclays CEO Bob Diamond's job and has shined a spotlight on the conduct of Barclays’ senior managers and compliance officers.
Check out this primer by PBS, which explains how the LIBOR is determined and how Barclays fudged the numbers in their favor.
What is the Significance?
So how did such unsavory corporate behavior go undetected for so many years?
The Commodity Futures Trading Commission (CFTC) cites Barclays' lack of internal controls as the reason for its supervisors' inability to detect executives' years of misconduct.
"Appropriate daily supervision of the desk by the supervisors, as well as periodic review of the communications, should have discovered the conduct. However, Barclays lacked specific internal controls and procedures that would have enabled Barclays’ management or compliance to discover this conduct," the CFTC order said.
Big Think recently caught up with another prominent banking chief executive who works far from the limelight of Europe's banking industry. Funke Osibodu, Chief Executive at Union Bank of Nigeria, offers her perspective about running one of Nigeria's largest banks in the video below.
Osibodu has had her fair share of challenges. She was tasked with turning around a beleaguered bank and she oftentimes made the news for all the wrong reasons, like labor disputes with her staff.
While Nigeria may be a world away from London, her advice is in line with what the CTFC has to say about Barclays' scandal. "In the new world in Union Bank corporate governance is very key," she says. "And corporate governance means that for all of us, there are some boundaries we don’t cross, and there is a price you pay when you cross those boundaries."
Image courtesy of SVLuma/Shutterstock.com.
Giving our solar system a "slap in the face."
- A stream of galactic debris is hurtling at us, pulling dark matter along with it
- It's traveling so quickly it's been described as a hurricane of dark matter
- Scientists are excited to set their particle detectors at the onslffaught
The climate change we're witnessing is more dramatic than we might think.
A lazy buzz phrase – 'Is this the new normal?' – has been doing the rounds as extreme climate events have been piling up over the past year. To which the riposte should be: it's worse than that – we're on the road to even more frequent, more extreme events than we saw this year.
Once again, our circadian rhythm points the way.
- Seven individuals were locked inside a windowless, internetless room for 37 days.
- While at rest, they burned 130 more calories at 5 p.m. than at 5 a.m.
- Morning time again shown not to be the best time to eat.
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