According to Reuters, the US Justice Department is building criminal cases against various financial institutions and their employees in relation to the London Interbank Offered Rate or LIBOR scandal.
The London Interbank Offered Rate (LIBOR), the European Interbank Offered Rate (EURIBOR) and the Tokyo Interbank Offered Rate (TIBOR) are set through a process whereby each day about 40 banks submit their interest rates at which they are willing to lend, to the respective trade organizations in their regions. Once the high and low bids are discarded, the rates of the two middle quartiles are arithmetically averaged. This process is repeated about 150 times to determine the final rates each day and extends to 10 currencies and across 15 time zones. The interbank offered rates serve as a reference for the pricing
of financial products worth $350 trillion that include floating rate mortgages, savings accounts, interest rate swaps, other OTC derivatives, student loans, corporate loans and credit cards. (Source: http://www.forbes.com/sites/investopedia/2012/07/26/the-libor-scandal/)
LIBOR rate provides great impact on mortgage borrowers' interest rates. For example, when Libor increases, associated interest rates and monthly loan can also go up. When it goes down, the adjustable-rate loans can also go down. For more explanation about LIBOR, please go to http://video.cnbc.com/gallery/?video=3000026495&play=1.
In 2008, USA Today reported that some American borrowers with Adjustable Rate Mortgage went up because the LIBOR rate increased. For consumers, you can find out if your loan is linked to LIBOR by reading your terms on your loan agreement. However, not all adjustable rates are tied to LIBOR, some are based from prime rate.
Brian Murray, a partner at the law firm Murray Frank has filed a lawsuit on behalf of investors in Alaska, Wyoming, North Dakota and about 20 other states accusing banks of manipulating the London Interbank Offered Rate through an opaque setting process. Given the wide reach of LIBOR, once the allegations are proven, this incident could be the largest financial fraud in history!
The case over the alleged rate fixing has been pending in court for 16 months. Some banks accused of rate fixing are Barclays, Citigroup Inc. and Bank of America Corp. According to Times, the LIBOR case could be tried in court for years, however it may only end up in settlements instead of punishment.
The London Interbank Offered Rate (LIBOR), the European Interbank Offered Rate (EURIBOR) and the Tokyo Interbank Offered Rate (TIBOR) are set through a process whereby each day about 40 banks submit their interest rates at which they are willing to lend, to the respective trade organizations in their regions. Once the high and low bids are discarded, the rates of the two middle quartiles are arithmetically averaged. This process is repeated about 150 times to determine the final rates each day and extends to 10 currencies and across 15 time zones. The interbank offered rates serve as a reference for the pricing
of financial products worth $350 trillion that include floating rate mortgages, savings accounts, interest rate swaps, other OTC derivatives, student loans, corporate loans and credit cards. (Source: http://www.forbes.com/sites/investopedia/2012/07/26/the-libor-scandal/)
LIBOR rate provides great impact on mortgage borrowers' interest rates. For example, when Libor increases, associated interest rates and monthly loan can also go up. When it goes down, the adjustable-rate loans can also go down. For more explanation about LIBOR, please go to http://video.cnbc.com/gallery/?video=3000026495&play=1.
In 2008, USA Today reported that some American borrowers with Adjustable Rate Mortgage went up because the LIBOR rate increased. For consumers, you can find out if your loan is linked to LIBOR by reading your terms on your loan agreement. However, not all adjustable rates are tied to LIBOR, some are based from prime rate.
Brian Murray, a partner at the law firm Murray Frank has filed a lawsuit on behalf of investors in Alaska, Wyoming, North Dakota and about 20 other states accusing banks of manipulating the London Interbank Offered Rate through an opaque setting process. Given the wide reach of LIBOR, once the allegations are proven, this incident could be the largest financial fraud in history!
The case over the alleged rate fixing has been pending in court for 16 months. Some banks accused of rate fixing are Barclays, Citigroup Inc. and Bank of America Corp. According to Times, the LIBOR case could be tried in court for years, however it may only end up in settlements instead of punishment.
No comments:
Post a Comment