How The LIBOR Scandal Could Affect You
The LIBOR scandal -- the latest debacle to send ripples through the global financial system -- centers on the alleged rigging of a somewhat obscure banking survey. But the actions of some of the bankers involved may have impacted interest rates all over the world.
Here is a brief explanation of the LIBOR scandal and a run-down of some of its likely implications:
Rigging the survey
LIBOR stands for the London inter-bank offered rate. It is a measure of the interest rate banks in London use to borrow short-term funds, and it is measured by a survey of several banks. The scandal became public when allegations surfaced that Barclays had falsified its survey answers in an attempt to influence the LIBOR rate for its own benefit.
This would all seem very much like inside baseball -- or inside cricket, given the location -- except for the fact that LIBOR is a benchmark interest rate used the world over as the basis for other lending rates. In other words, if Barclays did manipulate its LIBOR responses, it may have affected countless borrowers and lenders.