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Rate-rigging scandal won't affect us - BAZ

Rate-rigging scandal won't affect us - BAZ
By Chiwoyu Sinyangwe
Fri 06 July 2012, 13:25 CAT

BANKERS Association of Zambia says the expanding rate-rigging scandal which led to the resignations of two senior Barclays executives will not affect the local operations.

And ratings agency Moody's has cut Barclays standalone bank financial strength to negative from stable, citing the resignations of senior executives - chief executive Bob Diamond and chief operating officer Jerry del Missier - in the wake of an interest rate-rigging scandal.

Barclays, the UK's second-largest bank by assets, was fined a record 290 million pounds on June 25 for rigging Libor.

Chairman Marcus Agius has also announced his intention to leave once successors are found.

Driven by the culture of greed that analysts and market watchers say has poisoned the entire financial industry, reprehensive Barclays traders in the UK colluded with others to manipulate the London Interbank Offered Rate (Libor), the rate that big banks say they borrow on from each other which underpins trillions of dollars in global contracts.

In addition to the manipulation by traders, which took place from 2005-2009, Barclays has also admitted to deliberately understating its submissions of Libor rates at the height of the 2008 financial crisis to make its balance sheet look stronger.

UK newspapers have highlighted e-mails disclosed in the case which show traders congratulating each other for fiddling figures with promises of bottles of champagne.

Libor is a benchmark interest rate for pricing trillions of dollars of conventional loans and sophisticated products such as swaps.

The bankers declined to be identified because they were not authorised to speak for the company.

Libor is calculated by a survey of banks' daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies.

Because submissions are not based on real trades, the potential exists for the benchmark to be manipulated by traders.

Barclays which trades locally as Barclays Bank Zambia tried to manipulate the benchmark for profit, and to mask its difficulty in borrowing money during the credit crisis of 2000-2009.

The Barclays accord is the first in an investigation by regulators around the globe that has ensnared at least 12 banks, including Citigroup, HSBC Holdings, UBS, Credit Suisse Group and the Royal Bank of Scotland Group.

But BAZ chairperson Charity Lumpa said no bank can manipulate the lending system employed by the Bank of Zambia.

"Whereas Barclays Bank in the UK managed to manipulate the Libor rate, it is not something that any bank can do in Zambia," Lumpa said an emailed response to a query. "This is because the Central Bank sets the Monetary Policy Rate against which all banks set their lending rates. This is in itself provides assurance against any manipulation by the commercial banks."

BoZ only introduced a benchmark interest rate last April to replace the money-supply targeting that has since been its major policy lever.

Since the liberalisation of the economy in 1991, the country had largely the floatation system which analysts say weakened BoZ's ability to monitor and influence the way interbank lending rate was done as the financial markets lacked a credible and stable anchor for setting interest rates.

Labels: BANKERS ASSOCIATION OF ZAMBIA, CORRUPTION, INTEREST RATES

posted by MrK @ 11:36 PM