Barclays LIBOR

Barclays LIBOR
Name	Barclays LIBOR
Type	Interbank offered rate benchmark
Owner	Barclays PLC
Introduced	1986
Discontinued	2023 (phased)
Calc	Panel bank submissions
Currency	Multiple currencies

Barclays LIBOR

Barclays LIBOR was the contribution by Barclays PLC to the London Interbank Offered Rate panels used as reference rates for short-term wholesale funding. It served as a component in interest rate setting used by financial institutions such as JPMorgan Chase, Citigroup, HSBC, Deutsche Bank, UBS and by markets including the London Stock Exchange, New York Stock Exchange, Chicago Mercantile Exchange, Intercontinental Exchange and the Federal Reserve System. The contribution intersected with instruments traded by Goldman Sachs, Morgan Stanley, Barclays Bank plc, Credit Suisse, Bank of America, Santander, BNP Paribas and market participants like PIMCO, BlackRock, Vanguard Group, Allianz, and State Street Corporation.

History

Barclays began submitting rates when panels for the benchmark were formalized in the 1980s alongside institutions such as Royal Bank of Scotland, Lloyds Banking Group, Midland Bank, National Westminster Bank and international banks like Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, Mizuho Financial Group and Banco Santander. The benchmark's development involved regulators and institutions including the Bank for International Settlements, International Monetary Fund, World Bank, European Central Bank, Bank of England and the United States Department of the Treasury. Barclays’ role evolved through episodes that engaged market infrastructures such as SWIFT, settlement systems like Euroclear, and clearinghouses including LCH.Clearnet and Depository Trust & Clearing Corporation. Historical episodes drew scrutiny from authorities including the Financial Conduct Authority, Prudential Regulation Authority, U.S. Department of Justice, Securities and Exchange Commission, Federal Reserve Board, Office of Fair Trading and parliamentary inquiries in the United Kingdom Parliament.

Role in LIBOR Benchmarking

As a panel bank contributor, Barclays submitted daily estimates for interbank borrowing costs overseen by administrators and benchmark governance entities such as the British Bankers' Association, ICE Benchmark Administration, International Organization of Securities Commissions, Financial Stability Board, IOSCO and industry groups like the Association for Financial Markets in Europe. Those submissions influenced instruments including interest rate swaps, forward rate agreements, mortgage-backed securities, collateralized loan obligations, commercial paper, certificates of deposit and derivatives traded on venues such as CME Group, Eurex, London Metal Exchange and NASDAQ. Market participants from Goldman Sachs Asset Management to Aberdeen Standard Investments used the published rates for pricing corporate loans, syndicated facilities arranged by firms like Société Générale and Barclays Capital, and for valuation by accounting firms including Deloitte, PwC, KPMG, Ernst & Young.

Manipulation Scandal and Investigations

Allegations of submission adjustment led to probes by the U.S. Department of Justice, United States Commodity Futures Trading Commission, FCA, European Commission, Financial Conduct Authority and parliamentary committees such as the Treasury Select Committee. Investigations focused on interactions with traders at banks including UBS AG, Rabobank, RBS, HSBC Holdings plc, Goldman Sachs Group, Inc., Deutsche Bank AG, Credit Suisse Group AG, and communications on platforms such as Bloomberg L.P., Reuters Group, Thomson Reuters and internal messaging systems. High-profile testimonies involved executives from Barclays and contemporaneous litigation brought by entities like British Airways, Royal Bank of Scotland Group plc creditors, corporate borrowers represented by law firms including Linklaters, Freshfields Bruckhaus Deringer and Slaughter and May. Parliamentary hearings referenced evidence compiled by investigators from agencies including the Serious Fraud Office and cross-border coordination with authorities such as the European Securities and Markets Authority.

Legal and Financial Consequences

Legal actions culminated in fines and settlements by regulatory bodies including the U.S. Department of Justice Antitrust Division, CFTC, SEC, FCA and European Commission Directorate-General for Competition. Barclays faced penalties alongside institutions like UBS AG, RBS Group, Deutsche Bank AG and Citigroup Inc., and civil suits from investors such as Pension Protection Fund, World Bank Group clients, hedge funds like Bridgewater Associates and asset managers like BlackRock, Inc.. Consequences involved remediation programs overseen by auditors and consultants including Ernst & Young, KPMG LLP, Deloitte LLP and PwC; corporate governance changes influenced boards including non-executive directors from firms like Harvard Management Company alumni and governance advisers such as Institutional Shareholder Services. Barclays' settlements affected capital allocation decisions reported to regulators such as the Prudential Regulation Authority and influenced litigation in courts including the High Court of Justice, United States District Court for the Southern District of New York and appellate bodies.

Reforms and Transition Away from LIBOR

Reform efforts led by Bank of England working groups, the Financial Stability Board and administrators such as ICE Benchmark Administration resulted in development of alternative reference rates including SONIA, SOFR, ESTR, TONAR, and SARON. Contractual protocols from bodies like the International Swaps and Derivatives Association and market conventions promoted fallback language for outstanding contracts to reduce reliance on contributions. Transition involved market makers, institutional investors, clearinghouses including LCH Ltd and Options Clearing Corporation and affected legacy instruments administered by trustees such as The Bank of New York Mellon. Legislative and regulatory frameworks influenced by UK Treasury and U.S. Congress measures facilitated conversion processes and consumer protections referenced by consumer groups like Which? and Americans for Financial Reform.

Impact on Markets and Clients

The winding down of the benchmark altered pricing models used by investment banks including Goldman Sachs, Credit Suisse, Barclays Investment Bank and affected corporate borrowers like Vodafone Group, GlaxoSmithKline, BP plc and Unilever. Pension funds such as CalPERS, sovereign wealth funds including Government Pension Fund of Norway and asset managers like BlackRock adjusted risk models, hedging strategies executed on exchanges like CME Group and Euronext and by dealers such as NatWest Markets and Mitsubishi UFJ Financial Group. Consumers and mortgage holders serviced by firms like Santander UK, HSBC UK, Nationwide Building Society experienced contract migrations overseen by regulators including the Financial Conduct Authority and central banks such as the Federal Reserve System and European Central Bank. The transition reshaped research agendas at universities and think tanks including London School of Economics, Harvard University, Columbia University, Brookings Institution and Peterson Institute for International Economics.

Category:Benchmarks