LIBOR rigging: Difference between revisions

{{drop|T|om Hayes’ appeal}} from his conviction for “[[LIBOR]] rigging” follows Matt Connolly’s and Gavin Black’s acquittals in 2022 on equivalent US charges relating to the same actions. It centres on a two-limbed question:

 

''What do the LIBOR and EURIBOR fixing rules mean?''

 

''Whose job was it to decide what they meant, and by reference to what?''

{{drop|T|he basic model}} of a bank is to borrow, short-term, at a low rate, and lend, long-term, at a high rate. ''Generally'' banks calculate interest on overnight deposits, by which they borrow, at a [[Floating rate|floating]] rate. And they charge interest on the term loans, which they lend, at [[Fixed rate|fixed]] rates.  

''Generally'', therefore, banks ''borrow'' in floating and ''lend'' in fixed. They have “structural interest rate risk”. They want floating rates to be low.  In that case, all other things being equal, they make money. (All other things are not always equal, though, as we know (but, apparently, Silicon Valley Bank did not).)