Maintaining Organizational Integrity
Executive Summary
Barclays plc, in June of 2012, agreed to the fact that it had tampered with the London Interbank Offered Rate (LIBOR). LIBOR at the time served as a benchmark of the
interest rate that was basic to operate international financial based markets. In other words, it was the center for trillions of dollars in relation to financial
transactions. As from 2005 to 2009, Barclays, one of the largest global banks and very significant, manipulates LIBOR in an attempt to obtain profits and/or losses
originating from derivative trades. Furthermore, in 2007-2009 periods, it was discovered that Barclays offered dishonest low LIBOR rates of submission. The aim was to
dampen market speculation and that of negative media comments concerning the company’s viability in this financial crisis period. To settle the case with the United
Kingdom regulators and those of the United States, the company admitted to part with $450 million in terms of fines. In the next few days of the settlement, Robert
Diamond, Barclay’s CEO, resigned due to pressure from British Regulators. He then throws blame to a small section of workers related to the derivative trading, terming
their actions as “reprehensible.” That is, to him these were the persons that violated the LIBOR rate. With regards to rigging LIBOR rates with the intention of
limiting market and that of media speculation as concerns financial viability of Barclays, Diamond refused to accept any personal wrongdoing. If anything, he argued
that, Barclays served LIBOR better through honest LIBOR submissions as compared to other banks. That is why, he continued, it became questionable all of a sudden when
banks found it troublesome to later on nationalize its party more evident from their lower borrowing rates than Barclays.
Problem
Barclays bank is caught up in a LIBOR scandal. The first explanation of the problem is when the firm admits this scrupulous means to boost its gained profits or on the
other hand, limit the losses as much as possible. As if this problem is not enough, the bank later on takes advantage of its prominence in the world and underpays
preset LIBOR submission rates. To aggravate the situation further, the Barclays’ CEO, Robert Diamond throws the blame to some “insignificant” persons working under
derivative trading who associate rather directly with LIBOR issues. He even exempts himself from any wrong doing and calls the “insignificant” persons names like
“reprehensible.” It becomes known all over and the firm must seek a lasting solution to quench its own fire.
Solution
It is not long a period and Barclays trick is evident to all, especially the British and the United States Regulators. To solve this tainted public figure, Barclays
offers to pay $450 million fines to these powerful authorities. The other attempted solution on the part of the bank is its CEO cleaned his name as much as possible
from any blames, and insisted that the few “responsible” individuals under this docket to do with LIBOR to be charged. For us, solving the situation means we
understand the case, both sides of the divide, to know the real LIBOR standardized rates as a mechanism, and then factor in what Barclays did wrong. Consequently, this
would provide some long term solution, not just short term.
Reason
Already, the regulating authorities have raised an alarm that Barclays has overstepped in its legal mandate of paying LIBOR rates. Moreover, Barclays as a firm admits
their manipulative trickery on LIBOR rates and agrees to pay the stated fine. Nevertheless, its CEO uses side shows to shift focus from the big, prominent, worldwide
bank to bring it to what in the public domain is considered as a small “reprehensible” people dealing with LIBOR from the bank.
Discussion
A Summary of the Important Facts
An eminent scandal is present between Barclays bank and the London Interbank Offered Rate (LIBOR). The firm takes advantage of the LIBOR in two crafty ways. The first
way is to manipulate the LIBOR in its system so as to maximize profits garnered or rather cancel out on the losses, if any, that it might have ran in the process. This
is manifested in trillion dollar financial transactions. The second way is the payment of low LIBOR submission rates, substandard so to say. To cover up on this second
way, it insists that as compared to the other banks, Barclays pays the bigger amounts. While the surface value of the statement is true, the more subtle portion is
that its pay should focus on the agreed standard for LIBOR partners, not comparing it with other banks which are not the standard to start with.
Not long Barclays bank is caught by the long arm of the law: both U.K and the U.S. Regulators. It tries to find a way out by quickly accepting to pay fines in tune of
$450million. Then there is a little blame game as the CEO of Barclays, Robert Diamond, excuses his own person from the mess and throws blame on few individuals that
worked in the department dealing with LIBOR. The rigging attempt to do with LIBOR was not his making, Diamond insists.
At last all we are left with is a case that is partially solved. For future reference, it becomes fundamental to examine: firstly, the results of dishonoring the trust
of market participants. Secondly, we need to discover both cultural as well as leadership weakness at Barclays. Thirdly, we need to discover the challenge present
especially to effectively compete in a market. Then we have understanding how complacent regulators are to promote a corrupt system, and finally find out possible
effective remedies to systematic flaws existent in LIBOR.
Purposes
Identification
Barclays holds a LIBOR scandal whose cause, solution that include short and long term measures have to be put in place. The short term solution is to pay fine which
Barclays does of $450million. The long term measure is to find a way to prevent the source of the problem, so that no need would arise to solve the consequences of the
problem that is no longer there.
Evaluation
In fact, the reasons in summary are noted down to evaluate the outcomes of violating the market participants’ trust; to find out about cultural flaws and that of
leadership at Barclays; to understand the problem due to effective competition in a market in which systemic, and broadly known, corruption happens to exist; the
complacent nature of regulators in promoting a corrupt system; and lastly, what may or may not be effective solutions in relation to the flaws in LIBOR.
Principles
Identification
To be ethically sound, Barclays had to admit the fact that they had manipulated the LIBOR rates. Again, as per the rules and regulations governing the market
participants, Barclays had erred in this, and the legal way out was to pay a fine worth $450 million. My personal duty, right and ideals in this situation are to have
Barclays brought to justice for the short term solution. As pertaining the long-term, the problem must be eliminated to start with.
Evaluation
Within my rights, I will take the issue on media so that it is known all over. As the CEO of Barclays works on media to clean his name, I will be on the other end to
counteract his malicious intentions. I would spell them out emphasizing that a firm’s responsibility begins with him; no need to blame those with whom you share a
problem. If I could, I would challenge him by filing a suitcase against him concerning his failure to take up responsibility in times of failure. Although it does
hurt, no big deal because a perpetual problem of corruption would be solved already.
People
Identification
Barclays’ CEO, Robert Diamond, will not be happy with my decision of having him arraigned in court for acting “irresponsibly” via blame game. He has a right to make an
appeal and protect his individual rights according to the rule of the land, no more. He also has both the freedom to speak and that of expression. However, acting in
deliberate intent of falsely blaming others is uncalled for.
Evaluation
The Barclays’ CEO bear responsibility within the firms ethical limits. Personal freedom is also issued and at no time is it to be compromised by anyone, whoever that
individual may be. For instance, speaking his mind in the media as an individual and not as a representative of the Barclays firm has two different things. Thus, to
attack him under the firm while he spoke on personal ground makes the case immaterial as the evidence is irrelevant. Moreover, in law, a firm falls under artificial
person while an individual falls under a natural person.
