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Barclays Was Fined…but I Doubt They Noticed

The Libor scandal has cost Barclays $450 million.  That sounds like a lot to most people, but to Barclays is was hardly even a slap on the wrist.  It might as well have been a pat on the back after the bank lied for years about its borrowing costs to manipulate the most widely benchmarked interest rate in the world for its own benefit.

And the slap came from a few different places.  The Commodities Futures trading Commission fined the bank $200 million.  The US Justice Department levied a $160 million fine.  And going much easier than its US counterparts, the Financial Services Authority (FSA) in London fined the bank a modest $93 million.

And how did the FSA come up with the amount of the seemingly light fine?  The answer is no one knows.

The FSA told the BBC there was no specific formula for deciding how much the fine should be…it was more of a “judgment call”.  And they admit the process is “opaque”.  But according to the FSA handbook, they come up with a fine “that reflects the seriousness of the breach”.  So maybe the FSA doesn’t think what Barclays did was really that bad after all.

The $93 million slap from the FSA is equal to about ten days profit for Barlcays.  That looks like a token punishment rather than a stern message to the financial industry.

To Barclays the total $450 million fine is just a wrinkle…and about 5% of income for this year.  And that’s pretty light compared with other fines levied in recent years.  But the real cost to the bank isn’t counted in dollars.  It’s credibility.


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