Linking these examples is the simple fact that in each one bankers used opacity to take advantage of customers and other market participants.
Manipulating energy pricesThreat of a £290m fine from the Federal Energy Regulatory Commission for allegedly attempting to manipulate the price of electricity in California between 2006 and 2008. Barclays and four former employees – Daniel Brin, Scott Connelly, Karen Levine and Ryan Smith – were said to be buying or selling enough electricity to make the bank's positions in the swaps markets more profitable through moving the price up and down on the Intercontinental Exchange (ICE). ...Note: if banks were required to provide ultra transparency and disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details, this type of behavior would be immediately exposed.
Manipulating interest ratesBarclays was the first major bank to be fined for manipulating the benchmark Libor rate – initially to boost profits and later to protect its financial position – but it is unlikely to the be last. The Financial Services Authority has admitted it is looking at seven other financial firms and as many as 16 banks. Other firms are co-operating with regulators around the world. The bank has been named in class action lawsuits in the US and the Serious Fraud Office is investigating.Note: ultra transparency would both reopen the interbank lending market and allow market participants to calculate Libor independently.
Mis-selling interest rate swapsBarclays has set aside £450m to cover the cost of the latest mis-selling scandal. Small businesses, including fish and chip shops, were sold sophisticated interest rate swaps as a way to protect them against interest rate rises, often as a condition attached to a loan. The rate rises did not happen. Barclays is part of an industry-wide agreement to compensate customers.
Libor/interest rate swap mis-sellingA high court judge this week concluded that Bob Diamond, the chief executive who quit over Libor, and other Barclays bankers should appear in court to explain what they knew about the manipulation of the key rate in a case brought by Guardian Care Homes about mis-selling of rate swaps.
Mis-selling payment protection insuranceBarclays has just set aside a further £700m to cover the cost of PPI claims – taking its total bill to £2bn. Lloyds, which could make another provision when it reports on Thursday, has set aside £4.3bn. Royal Bank of Scotland's bill stands at £1.3bn, HSBC's at £1.1bn and Santander's at £500m. Customers were sold PPI alongside loans to cover sickness or unemployment but the insurance was not needed and did not pay out.