LIBOR SCANDAL

LIBOR.

With £350 trillion of debt linked to LIBOR - from mortgages to credit cards - you'd be forgiven for expecting LIBOR to be set by bewildering complex financial model that only two or three people in the entire world understood.

But no.

Every day at 11 am, 16 of the world's major banks meet under the auspices of the British Banking Association (BBA). They each "guess" how much interest they would pay if they had to borrow money. The BBA ignore the top four guesses and the bottom four guesses. The BBA then average the remaining eight to arrive at that day's LIBOR.

In terms of complexity, it's one notch up from a game of schoolboy spoof.

Not surprisingly, such a system is easy to rig and it's little wonder that when things got tough in 2008, a few of the banks started to manipulate their "guesses".

There have been rumours about market fixing for some years now and the BBA launched an investigation a few years back. Amazingly the BBA concluded that there was no evidence of any rigging and that LIBOR had "an enviable reputation"!

Of course, if you or I sat in a room every day with 15 of our competitors to "guess",  and then fix, the market price of our major supply, we'd be operating an illegal cartel. Before you could say "bankers bonus" we'd all be off to prison. Not so in banking it seems..............