British Bankers’ Assn. May Lose Libor Oversight

The recent Libor price-rigging scandal may cost the British Bankers’ Association (BBA) its oversight of the interest rate that provides the reference for over $500 trillion in securities, according to Bloomberg News. The BBA has been assigned fault in the Libor debacle by both the U.S. Treasury Secretary and the Bank of England because the BBA failed to respond adequately when concerns were raised in 2008 about the accuracy of bank quotes. As late as June, the BBA’s Libor panel continued to resist using actual transactions as a basis for Libor instead of quotes.

BBA Could Suffer from Libor Securities Fraud.

The Libor scandal is not the first scandal to have touched the BBA in recent years, but it has undoubtedly dealt a significant blow to the association’s reputation. The BBA represents over 200 banks, and the association lobbies regulators and policymakers on behalf of the banking industry. Without its Libor oversight responsibilities, the BBA would become a simple lobby group.

The Libor benchmark is set by a daily poll of banks, which asks the banks to estimate the likely cost of borrowing from each other in different currencies and for different periods of time. The BBA helped introduce the Libor in 1986, and extracting the BBA from the benchmark rate may be complicated because Libor has sometimes been referred to in contracts as the “British Bankers’ Association interest rate.”

After banking giant Barclays was fined in late June, the U.K. Treasury took the reins and announced its own review of Libor-setting procedures and whether the process should be brought under governmental oversight.

Whistleblowers Can Help Uncover Fraud.

A significant number of banks, as well as the BBA, contributed to the Libor scandal because there was a strategic advantage to them in fixing the interest rate. With so many entities involved in the fraud, there were many people who could have blown the whistle on the Libor fraud.

Whistleblowers play an important role in helping the government fight fraud. A whistleblower is generally motivated to come forward because he or she has seen something that is wrong and wants to make it right. Sometimes whistleblowers are employees or colleagues who have been told to do something that they know or fear is illegal or unethical.

Because the government relies on whistleblowers to help uncover fraud, in some cases whistleblowers may receive a cash reward for their assistance or will be permitted to share in the government’s recovery. There are a number of statutes that control the types of cases and circumstances under which a whistleblower may be entitled to such an award.