Tag Archives: Libor

Has Internal Audit Measured Up? What Do We Do Next?

The following article was first published in the Global Risk Update published by Risk Reward Limited.

Over the past few years banks have constantly been in the news, unfortunately rarely for the right reasons. A number of different scandals have hurt both the reputation and image of the industry. Foremost amongst these scandals are:

The Financial Crisis—a well documented global disaster
A Foreclosure Crisis—the reaction of banks to mortgage defaulters
Libor Manipulation—affected the most important borrowing/lending rate in the world
Rogue Trading—several episodes where unauthorised trading exposures lead to huge losses
Energy Markets Manipulation—subject of major new investigation by the SEC/CFTC
Money Laundering—a number of major banks have paid very hefty fines
Insider Trading—has involved some major figures on Wall Street and the City
Product Mis-Selling—massive fines for major banks

This does not make good reading for anyone involved in the industry but auditors in particular have real cause for concern. Continue reading

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What We Learned From The Bob Diamond Testimony

Bob Diamond appeared before the Treasury Select Committee of the British Parliament today. While some MPs had more than a reasonable banking knowledge and asked some good questions, both sides came up short. Here is why along with some general observations.

Where MPs Came Up Short

MPs still suffer from derivatives derangement syndrome and a total misunderstanding of investment banking. Diamond had to remind MP Pat McFadden that Halifax, HBOS, Alliance & Leicester and Northern Rock all collapsed and they had nothing to do with derivatives and the riskiness of investment banking.

Following on from the above, it appears that MPs, along with the rest of the population do not realize that loans involve risk taking and that losses do not only come from derivatives or “casino” banking—a most unbelievable notion. Until MPs and regulators fully understand the dimensions of risk they should forego any decision to change the structure of the industry. Continue reading

Barclays LIBOR Storm Clouds

The LIBOR problem will spread well beyond Barclays and once again banks are being asked serious questions about their values and their culture. What next for the industry?

The manipulation of the LIBOR rate by Barclays and other banks is about to set-off another major crisis within the banking industry. There appears to be no question about the bank’s guilt as Barclays have actually admitted wrongdoing and have applied to the EU for whistleblower status.

For all the negativity that will be thrown at them in the coming days and weeks, that action on the part of the management is actually quite commendable. If you disagree then I suggest you look at the number of times banks have been caught doing wrong and pay large fines but at the same time refuse to admit any wrongdoing. Continue reading