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Thursday, May 29, 2008

LIBOR Liars: UBS, HSBC, Royal Bank of Scotland (UPDATE1)

This post is an update on LIBOR Liars: UBS, HSBC, Royal Bank of Scotland.

UBS (UBS) and Royal Bank of Scotland (RBS) have since been taken out back behind the woodshed and shot. HSBC (HBC) has been hanging tough. Maybe they lied less?

Libor Banks Misstated Rates, Bond at Barclays Says (Update2): “Banks routinely misstated borrowing costs to the British Bankers' Association to avoid the perception they faced difficulty raising funds as credit markets seized up, said Tim Bond, a strategist at Barclays Capital.

“The rates the banks were posting to the BBA became a little bit divorced from reality,” Bond, head of asset- allocation research in London, said in a Bloomberg Television interview. “We had one week in September where our treasurer, who takes his responsibilities pretty seriously, said: ‘right, I've had enough of this, I'm going to quote the right rates.’ All we got for our pains was a series of media articles saying that we were having difficulty financing.”

Discrepancies in the rates that banks quote are creating a crisis of confidence in the London interbank offered rate, the benchmark for 6 million U.S. mortgages and more than $350 trillion of derivatives and corporate bonds. In the first four months of 2007, the difference between the highest and lowest rates for three-month Libor didn't exceed 0.02 percentage point, according to JPMorgan Chase & Co. In the same period this year, it was as wide as 0.17 percentage point.”

Crisis of confidence indeed.