Banks are among the main culprits in the 2008 global financial crisis. Hardly has the global economy recovered from the post-crisis hungover when we begin to discover even more sins committed by banks over the last five years.
The scandal over suspected LIBOR (London Interbank Offered Rate) manipulations is already dubbed the greatest scandal in the history of banking.
The Economist has estimated that the interest rate dictates the price of financial instruments worth about USD 800 trillion (more than 11 times the annual output of the entire world's economy!), including credit to private and public sectors, derivative financial instruments, and credit cards.
Moreover, the scandal is spreading. After Barclays was punished with a record-breaking fine and had to sack its management, the forgers' suspect list now contains about 20 more of the world's major banks, including Deutche Bank, JP Morgan, Citigroup, Credit Suisse, UBS, and HSBC.
Whom can one trust when cheating turns out to be taking place in the centre of global finance, the City of London? When the manipulator is nothing less than Barclays, a bank boasting previously impeccable reputation and 300 years of doing successful business? Even worse – suspicions are that the financial manipulations were known and perhaps even endorsed by banking supervisors, the very institutions charged with ensuring fair practice.
It would be naive to assume that banking regulators are more moral than bankers themselves. We are all humans with human weaknesses and everyone trips every once in a while. The point is to prevent further trampling on morality. Legal acts and regulations in themselves have no power either to create or establish morality. It is important to discover the guilty and punish them, irrespective of which camp they belong to.
It would be naive to assume that banking regulators are more moral than bankers themselves.
Dishonest practice must not be tolerated. This is the only way to rebuild public trust in the finance sector which cannot properly function without it. And our modern economy is hardly conceivable without a successfully-functioning financial sector.
How is LIBOR scandal relevant to Lithuania?
Unlike mature democracies, we find it much more difficult to defend moral values. What is there to defend if some of those must be built from scratch, having been non-existent during the Soviet times?
This seems to be the task of a much greater importance than eliminating direct damage that we might suffer as a result of trampling with LIBOR rates and international capital markets.
One inescapably draws parallels between the LIBOR scandal and the story of Snoras bank in Lithuania. Thank goodness it has not yet destroyed confidence in banks. The way this story is resolved will show what situation our morals are in right now and whether we can be ascertained that fears about banking are a thing of the past.
