Thursday, October 31, 2013

Money Matters from BBC

Bankers: Money Close-up

From the Banking Crash to the Libor Scandal – BBC World News uncovers the inside story of an industry in turmoil 

Bankers - New three part series to be broadcast from Saturday November 9th

London 29th October 2013. As the global banking industry fights to regain trust and clean up its balance sheets, BBC World News is to broadcast a new programme exploring the now infamous Libor rate fixing scandal. With high level interviews and expert analysis, Bankers – Fixing the system uncovers the scandal that ripped through the banking industry in 2012. 

This documentary, which is part one of three, explores what happened through the downfall of American banker and former group Chief Executive of Barclays, Bob Diamond. Interviews include: former Barclays Chairman Marcus Agius, Chairman of RBS Group Sir Philip Hampton, Deputy Governor of the Bank of England Andrew Bailey, Jean-Claude Trichet President, European Central Bank (2003-2011), Gary Gensler, Chairman, US Commodity Futures Trading Commission and Lord Turner, Chairman of the UK’s Financial Services Authority (2008-2013).

After the crash of 2008, governments around the world spent billions bailing out the banks and five years on public money is still propping up the system. But in 2012 people’s trust in the system was rocked again, when the Libor scandal erupted. Libor is an obscure rate setting mechanism that relates to the loans banks make to each other. Although Libor is set in London, it’s also used in America and all around the world. And by the end of 2012 traders across three global banking groups; Barclays, RBS and UBS stood accused of fixing this rate to make money simply for themselves.

As Gary Gensler, Chairman, US Commodity Futures Trading Commission tells the programme:
“This is the mother of all the reference rates. Some people might be familiar with reference rates in gold and in oil and, and some people even think of reference rates in housing markets where homes sell. But this is, is throughout our financial system it affects all of us really.”

Discussing the impact of Libor, Gensler adds: 
“It’s massive. There’s three hundred trillion dollars of contracts based on it. Let me repeat it’s three hundred trillion dollars of contracts. That’s about 6 times the world economy, just to put it in orders of magnitude of dollars of contracts.”

Referring to the changing culture of banking that some feel set the context for Libor manipulation – from making money for clients to making money from clients, Chairman of RBS Group Sir Philip Hampton commented: 
“What we lost sight of in this narrow pursuit of profit, is actually that banks have got a big complex role in society; they’re not just about making profit for themselves this year, they are about greasing the wheels of, of commerce. They need to be stabilisers and that is part of their duty and it’s part of the return they get.”

And some in the industry felt not all Libor manipulation was a sin. Deliberately understating Libor estimates or Lowballing, so your institution does not stand out as one other banks don’t want to lend to, could be understandable, if it was to try and keep the system afloat at the height of the crisis. Martin Taylor, Chief Executive of Barclays, (1994-98) commented:

“I don’t regard that as a serious offence or even an offence at all. I think at the time the banks were not lending to each other, there barely was a Libor, out there. The most important thing for the authorities and the banks was to avoid the panic which was already very, very serious, getting worse than it was. And I think unnecessary fuss has been made about what may have happened in a few weeks in 2008. I’ve a lot of sympathy then with the editing of the... Libor rates, shall we say.”

But Lord Turner Chairman of the UK’s Financial Services Authority (2008-2013), told the programme: 
“What it illustrated was a group of people being paid a large amount of money who’s attitude to what they were doing was so deeply cynical who clearly did not feel that they were doing something which had to be conducted in integrity and which was important to the real economy, they just thought it was a computer game where you had the same right to as it were cheat and kill the other guy as you have on a computer game.”

And Martin Taylor comments:
“If you have a situation where a human being is going to have more money if he cheats, a lot of them are all tempted to cheat. And you have to have controls in place to make sure they don’t.”

Former Barclays Chairman Marcus Agius also shares his thoughts as he learnt to the full scale of the Libor situation that led to his and Bob Diamond’s resignations:
“I learnt about the traders’ activities in one of the regular meetings that we had um between the board committee and the lawyers who were acting on our behalf and I was sick to my stomach, sick to my stomach because I realised just what an appalling thing it was and I realised what a serious implication it would have for the bank.”

On Barclays’ reaction to the US and UK Regulators reports into Libor fixing at Barclays and subsequent fines, Agius said:
“We obviously had to take a view before we made the announcement as to what the right reaction should be for us and we tried to measure the vile nature of the activity with it’s scale and produce a proportionate response. What happened was when the announcement went out the public reaction focused far more on the nature than the scale and I think the, the subsequent reaction did take us by surprise because it wasn’t as we had judged it. We misjudged that.”

Bankers is a three part series which brings together bank bosses, regulators and politicians to explore what went wrong in an industry that is central to our societies.

Episode 1 ‘Bankers - Fixing the system’ will be broadcast on BBC World News on Saturday 9th November at 01.10, 15.10 GMT and on Sunday 10th November at 09.10, 20.10 GMT.

Episode 2 ‘Bankers – Risking it all’ tells the story of two recent multi-billion pound trading disasters that rocked the City. Former Goldman Sachs Chairman and New Jersey Governor Jon Corzine of MF Global with the Eurobonds and JP Morgan and the Whale Trades both illustrated the risks being taken five years after the crash.

Episode 3 ‘Bankers – Payback time’ looks at how Britain's multi-billion pound financial miss-selling scandal, known as PPI, transpired. With first-hand accounts from bank bosses, sales staff, politicians and customers, the film charts three decades of extraordinary changes inside high street banks.

Friday, November 8, 2013 at 8:10 pm ET
Saturday, November 9, 2013 at 11:10 am ET
Sunday, November 10, 2013 at 3:10 pm ET

Episode 2 will air November 15-17 (in time slots above) and episode 3 will air November 22-24 (in time slots above)...