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LIBOR rigging: Difference between revisions
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== Other action in the LIBOR == | == Other action in the LIBOR == | ||
This is not the saucy carry-0n in the interest rate market. For something that is meant to be dullsville, after school chess club was quite the hotbed. At about the same time, Britain’s commercial bankers were having fun at the hands of the caravan parks, flying clubs and property investment consortia of middle England. The [[interest rate swap mis-selling scandal]] is a many-headed hydra — it turns out most commercial banks in the UK had hit upon variations on the same idea independently of each other and then jammed it down middle England’s gizzard, but the gist was this: rather than just offering them straightforward loans, banks would offer floating rate loans stapled — loosely — to complicated hedging products. | This is not the only saucy carry-0n in the interest rate market. For something that is meant to be dullsville, after school chess club was quite the hotbed. | ||
Those taking loans from banks for a term, you would expect to want fixed interest. | |||
At about the same time, Britain’s commercial bankers were having fun at the hands of the caravan parks, flying clubs and property investment consortia of middle England. The [[interest rate swap mis-selling scandal]] is a many-headed hydra — it turns out most commercial banks in the UK had hit upon variations on the same idea independently of each other and then jammed it down middle England’s gizzard, but the gist was this: rather than just offering them straightforward loans, banks would offer floating rate loans stapled — loosely — to complicated hedging products. | |||
This would be odd enough if it were just a floating rate loan and a fixed rate swap — why not just lend at a fixed rate — but these swaps had all kinds of funky features that didn’t suit any obvious commercial need, and banks sold them often by appealing to the borrowers’ vanity or dubious interest rate risks. A fun example was the “enhanced dual fixed rate protection” under which: | This would be odd enough if it were just a floating rate loan and a fixed rate swap — why not just lend at a fixed rate — but these swaps had all kinds of funky features that didn’t suit any obvious commercial need, and banks sold them often by appealing to the borrowers’ vanity or dubious interest rate risks. A fun example was the “enhanced dual fixed rate protection” under which: | ||