Integrity in Finance Notes

Write a 2-3 page essay describing an ethical problem in a corporate setting. It should include
description of the problem, who were the beneficiaries and who lost because of it, and what
should be done to prevent such a situation.(Due 4pm, 08/31/2015)

• Ethical Problem
• Big banks manipulated libor rates
• Collusion among banking entities to fix the market
• Shakes severe trust in the financial markets
• Libor is most used bench-mark, used as a base rate for many other banking
transactions
• Student loans, auto, home, gov & corp debt tied to libor rates
• After 2008, submitted low rates to seem more credit worthy
• Beneficiaries
• Big banks and their traders benefited from the fixed rates
• Trillions of $ were priced at wrong rates, hurting ordinary citizens
• Many central banks rely on this info, they were mislead
• Much trust has been destroyed by these actions
• Future situations
• More penalties
• More individual focus to hold people accountable
• Increased regulations and transparency might help also
• Reform of the interbank system
• Switching to a transaction based rate system might be more reliable but might
produce more volatility