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Questo articolo è stato pubblicato il 08 agosto 2012 alle ore 05:59.
L'ultima modifica è del 08 agosto 2012 alle ore 04:26.


The Libor and Euribor scandals are certainly the most serious of all financial scandals. And it goes without saying that given all recent and distant precedents, it was a record harder to beat than those of Usain Bolt. Those who profited from rigging interest rates that influence 500 trillion derivatives rightly deserve the description of “banksters” used by EU Commissioner Viviane Reding and by news outlets such as The Economist, which cannot be considered prone to populist justice. 

While ongoing investigations have unveiled only a small percentage of those involved in the case, some key elements are more or less certain, a fact that can provide useful indications of how to restore the credibility and transparency of a crucial segment of the global financial system. 

The Libor and Euribor are so-called potential rates: they indicate a point on the curve that represents the offer of short-term funds—in other words, they refer to the rates on which large banks can make loans to other banks, without collateral guarantees, depending on different deadlines and a given time of the day. As a consequence, they are widely retained by key operators across markets (18 for Libor, above 50 for Euribor), according to a procedure that has been developed in cooperation with the British and the EU bankers’ associations.

The investigations shed light on two violations: while the manipulation of interest rates lasted for years, the tendency at the peak of the crisis was to declare lower rates, as banks had every incentive to not make loan rates that other banks were willing to apply look too high. This second element is contingent, and today it allows banks, starting with Barclays, to say that all problems depend on the crisis and that regulators weren’t doing their job. But the fact that the manipulation of a key interest rate lasted for years and was carried out by key financial institutions is the most serious aspect of the scandal, as at least a dozen banks have already been implicated. 

The fundamental problem, therefore, is the method used to assess the rates: it’s no surprise that a procedure based on the rituals of the city of the 19th century is no longer suited for today's financial world. The evidence for this is two disturbing facts highlighted by preliminary investigations.

First, the pressure to manipulate rates is extremely strong: one of Barclays’ contested operations involved a one-basis-point reduction that led to a 2 million pound profit. It’s like when Saint Anthony was tempted in the desert; the fact that sanctity is a very rare virtue in banks’ trading rooms is widely recognized. Second, as a consequence of that, manipulations were so common that they became part of a shared culture across trading rooms. Evidence of that is the e-mails exchanged by traders, e-mails that suggest the existence of a widespread sense of immunity from internal controls as well as from regulators’ oversight.This shows that it’s not enough to call for stringent punishments for a few bad apples or the traders that were left to their own destiny after being caught. Of course the seriousness and size of the scandal deserve the application of existing market-abuse and anti-trust rules, rules that are already fairly strict and will mandate high costs, not only for the reputations of the banks involved but in actual compensatory damages. Despite what Commissioner Michel Barnier says, the priority should not be to stiffen rules but to respect those already in existence and to ensure that different investigations proceed at a consistent pace.

It’s crucial that we take drastic step regarding the process that determines interest rates. There are two alternatives: to continue to determine them by referring to potential rates while also improving a procedure that now relies on self-regulations, or to switch to a system based on negotiated and verifiable rates. The U.K. government launched a separate investigation, run by independent experts, that will certainly influence future decisions.

Even today, we can say that while keeping things as they are is a genuine possibility, it is, nonetheless, unlikely. It’s possible to increase the number of banks that are involved in setting the rates (it’s worth noting that the manipulations affected Libor rates more than Euribor rates) or to lay out self-regulatory mechanisms. The problem, however, is that these reforms are credible only if there is widespread confidence that banks will be able to adopt self-regulatory mechanisms. But that confidence is now lost. It is also wrong to think that penalties will be an effective deterrent when it comes to the problems that have been surfacing in recent days. It was Bob Diamond, the former Barclays CEO caught in the Libor scandal, who in early 2011 said, “The time of remorse is over.”

It makes more sense to give up the idea of purely potential rates and switch to rates negotiated effectively on the markets. While this option has several technical inconveniences, its problems are small compared to the risk inherent in a system based exclusively on self-regulation. It’s also important to stress that one solution does not exclude the other, since it’s possible that the current system will have to be adopted for existing contracts.

What’s most important is to understand that the largest financial scandal in history requires not only a complete investigation into what went wrong, but also effective and radical solutions.