Barclays and the LIBOR Scandal

Clayton S. Rose; Aldo  Sesia

Case | HBS Case Collection | January 2013 (Revised October 2014)

Barclays and the LIBOR Scandal

by Clayton S. Rose and Aldo Sesia

Abstract

In June of 2012, Barclays plc admitted that it had manipulated LIBOR—a benchmark interest rate that was fundamental to the operation of international financial markets and that was the basis for trillions of dollars of financial transactions. Between 2005 and 2009 Barclays, one of the world's largest and most important banks, manipulated LIBOR to gain profits and/or limit losses from derivative trades. In addition, between 2007 and 2009 the firm had made dishonestly low LIBOR submission rates to dampen market speculation and negative media comments about the firm's viability during the financial crisis. In settling with U.K. and U.S. regulators the firm agreed to pay $450 million in fines. Within a few days of the settlement, Barclays' CEO, Robert Diamond, had resigned under pressure from British regulators. Diamond blamed a small number of employees for the derivative trading related LIBOR rate violations and termed their actions as "reprehensible." As for rigging LIBOR rates to limit market and media speculation of Barclays' financial viability, Diamond denied any personal wrongdoing, and argued, that if anything, Barclays was more honest in its LIBOR submissions than other banks—questioning how banks that were so troubled as to later be partly nationalized could appear to borrow at a lower rate than Barclays. This case explains why LIBOR was an essential part of the global financial market, the mechanism used to establish the rate, and what Barclays did wrong. The case allows for an examination of: i) the consequences of violating the trust of market participants, ii) cultural and leadership flaws at Barclays; iii) the challenge of effectively competing in a market where systemic, and widely understood, corruption is taking place, iv) the complicity of regulators in perpetuating a corrupt system; v) what might, or might not, be effective remedies for the systemic flaws in LIBOR.

Keywords: financial systems; financial services; ethics; corruption; regulation; culture; leadership; general management; Management; Leadership; Economic Systems; Crime and Corruption; Ethics; Culture; Banking Industry; Financial Services Industry; United Kingdom;

Language: English

Format: Print

22 pages

Educators Purchase

Citation:

Rose, Clayton S., and Aldo Sesia. "Barclays and the LIBOR Scandal." Harvard Business School Case 313-075, January 2013. (Revised October 2014.)

In 2018, the Hollywood film industry is facing tough headwinds. Fewer and fewer Americans are going to movie theaters, opting instead to watch movies on demand in the comfort of their own homes or on portable devices. Adam Aron, the head of the world’s largest movie theater chain, AMC Entertainment, is employing an aggressive strategy to bolster the moviegoing experience by adding new amenities including plush reclining seats, reserved seating, and upscale food and beverage options. He is also placing a special emphasis on expansion overseas where the market is growing. Will his actions allow the company to successfully compete in a mature industry under assault by new digital competitors? With the growing popularity of entertainment subscription services like Netflix and Spotify, should AMC adopt a similar business model?

Technical Note | HBS Case Collection | December 2018

Note on Economic Inequality (2018)

Rebecca Henderson, Clayton S. Rose, Jessica A. Gover and Aldo Sesia

For over half a century, most of the world's economies have enjoyed steady growth and prosperity. While this economic growth has reduced the number of people living in poverty, it has come with an increase in economic inequality. The gap between the "haves" and the "have-nots" in developed countries has widened, with a small proportion of the population reaping an increasingly larger share of a country's economic rewards. This growing economic inequality has been particularly pronounced in the United States, but the phenomenon has also occurred in many nations. This note provides background on aspects of economic inequality. It begins by describing both income inequality and wealth inequality, providing an explanation of two widely used metrics and data that show increasing inequalities over time. It then moves to the factors that might contribute to this inequality, as well to propositions of economic and social consequences that might result from the widening gap. Finally, it addresses the issue of "equality of opportunity" or social mobility. This is an update to the Note on Economic Inequality (2015). It provides additional information on economic inequality, including union membership and inequality and political polarization.

Keywords: Economic inequalty; wealth inequality; equality of opportunity; political polarization; Economic Growth; Economics; Income; Wealth; Equality and Inequality; Society; Problems and Challenges;

Citation:

Henderson, Rebecca, Clayton S. Rose, Jessica A. Gover, and Aldo Sesia. "Note on Economic Inequality (2018)." Harvard Business School Technical Note 319-071, December 2018. View Details

Cite View Details Educators

Faculty & Research

Barclays and the LIBOR Scandal

Abstract

Citation:

More from these Authors

Faculty & Research

Barclays and the LIBOR Scandal

Abstract

Citation:

Related Work

More from these Authors