The Libor It is calculated for 10 different currencies and 15 borrowing periods. There are 18 banks that submit rates for the U.S. dollar Libor.

JUNE 27, 2012 Last month, Barclays paid $450 million to settle accusations that it had tried to manipulate Libor rates. Since then, its submitted rates have risen.

JULY 29, 2007 “Pls go for 5.36 libor again, very important that the setting comes as high as possible ... thanks.” — Trader in New York to submitter

SEPT. 13, 2006 "Hi Guys, We got a big position in 3m libor for the next 3 days. Can we please keep the lib or fixing at 5.39 for the next few days. It would really help. We do not want it to fix any higher than that. Tks a lot." — Senior trader in New York to submitter

DEC. 14, 2006 “For Monday we are very long 3m cash here in NY and would like the setting to be set as low as possible ... thanks” — Trader in New York to submitter

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What Barclays Did

What Is Affected by the Rate

How the Rate Is Set

Two Kinds of Manipulation From 2005 to 2007, swaps traders often asked the Barclays employees who submit the rates to provide figures that would benefit the traders, instead of submitting the rates the bank would actually pay to borrow money.

The Libor is a benchmark interest rate that affects how consumers and companies borrow money across the world. The rate is set by the British Bankers’ Association (B.B.A.), an industry group in London.

British Bankers’ Association The B.B.A. throws out the highest and lowest 25 percent of submissions and averages the remaining rates. This is the Libor.

Banks Submit Figures Each weekday, leading banks around the world each submit a figure to the B.B.A. based on the rate at which they estimate they could borrow funds from other banks.

Derivatives The Libor is often used to price financial instruments like swaps transactions and futures contracts. At least an estimated $350 trillion in derivatives and other financial products are tied to it.

Later, during the height of the financial crisis, Barclays submitted artificially low rates to give the impression that the bank could borrow money more cheaply and was healthier than it was.

Certain traders at Barclays coordinated with other banks to alter their rates as well.

Between 2005 and 2007, employees in Barclays’ trading units convinced employees responsible for submitting Libor rates to alter the bank's rates based on their derivatives trading positions to bolster their own profits.

Loans To calculate interest rates, some lenders use the Libor as a base and add additional interest based on the borrower. When the Libor goes up, rates and payments on loans tied to it can rise as well.

Student Loans About half of variable-rate private student loans are tied to the Libor.

Mortgages Of the mortgages in the United States that are adjustable-rate, about 45 percent of prime mortgages and 80 percent of subprime have interest rates based on the Libor.

Lighter lines represent rates submitted by other banks

Calculated average

Rate Barclays submitted

Calculated average

Rate Barclays submitted

LEHMAN BROTHERS BANKRUPTCY

Three-month Libor rates

Three-month Libor rates

Period of chart below

In 2008, Barclays submitted artificially low figures to deflect scrutiny about its health.

In October 2008, a Bank of England official questioned why Barclays’ submissions were high compared with other banks. After this, the Barclays rates fell closer to those of other banks. Barclays has released documents saying that some bank executives believed the official had instructed them to lower its rates, but the official has denied any improper actions.

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2012

2010

2008

2006

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Dec.

Oct.

2%

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Jan. 2009

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July 2008

Aug.