Manipulation of the interbank lending rate Libor... Where can we see ethics in this?

Welcome back my followers! Its slowly coming to an end, I hope you all enjoy my last few posts. Keep your eyes open they will be rather interesting ones! Another week of an unethical company will be discussed, this week it will be Bob Diamond? Does his name sound familiar? Keep reading!

"In doing so we damaged our ability to make long-term sustainable returns"

Bob Diamond should be famous for installing high-quality risk management in the group to dodge the worst of subprime crisis! Barclays bank has been hit with record fines totalling £290m by financial regulators on both sides of the Atlantic after staff were found to have attempted to manipulate the benchmark Libor rate which ultimately governs the rate at which banks loan money. How shocking right? It means that millions of holders or mortgages, credit cards and small business loans may have been charged more than was necessary. How would you feel if you were part of one of those small businesses? Would a red flag be risen for unethical behaviour?

Right let's get on...

Ethics played second fiddle to self-interest. First a number of senior executives including the CEO Bob Diamond reacted to the media criticism by announcing they would forgo their bonuses. Is this right? Then, as the scandal escalated, the Barclays Chairman, Marcus Aguis announced his resignation. Was this to hide from the unethical behaviour they have been perceived through? Barclays either pushed the Libor rate up at the behest of traders who needed a higher rate to return profit, or squeezed the rate lower to reduce its costs and make the bank appear better and safer than it actually was, (lower Libor rates being a sign of good health). Can we see this as a ethical dilemma within in the company? Or an ethical issue?

I believe the banks suspended normal ethical standards and were selling products that were profitable for the investment banks, not well understood by the banking staff that were introducing them, and not at all understood by the customers who were buying them. Can we agree to this? Leave a comment below in the comment section with your opinion of this scandal! The ethical boom has been driven by a perceived lack of ethics in the policies of the biggest banks but going ethical is not always straightforward. What are your views of unethical behaviour in the banking industry? Is the industry holding the loyalty of customers and stakeholders? Where funds are managed by trustees or spread widely, as with most local authority pension schemes, it can be often be very difficult to prevent investments that run contrary to strongly held an often very personal ethical standards.  

Ethical investors not only need to watch which companies are being invested in by their funds but also who is investing on their behalf. Barclay has been fined for falling foul of regulators and anti-money laundering rules.  In many ways an ethical bank is much the same as any other bank. Of course we know this has affected the loyalty of customers, investors, and so on... How much can we put our trust in the banking industry? Until next time...

Hit me up with your comments below!

It's a wrap!

RS.