In The Banking World, Governance Is Key
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.
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Is it "perverseness," the "death drive," or something else?
A disturbing interview given by a KGB defector in 1984 describes America of today and outlines four stages of mass brainwashing used by the KGB.
- Bezmenov described this process as "a great brainwashing" which has four basic stages.
- The first stage is called "demoralization" which takes from 15 to 20 years to achieve.
- According to the former KGB agent, that is the minimum number of years it takes to re-educate one generation of students that is normally exposed to the ideology of its country.
It's up to us humans to re-humanize our world. An economy that prioritizes growth and profits over humanity has led to digital platforms that "strip the topsoil" of human behavior, whole industries, and the planet, giving less and less back. And only we can save us.
- It's an all-hands-on-deck moment in the arc of civilization.
- Everyone has a choice: Do you want to try to earn enough money to insulate yourself from the world you're creating— or do you want to make the world a place you don't have to insulate yourself from?
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