Case Studies Flashcards
2008 LIBOR rate fixing scandal
The 2008 LIBOR rate fixing scandal rocked the financial world, as it revealed major banks were manipulating the London Interbank Offered Rate (LIBOR) to suit their trading positions. This scandal not only resulted in substantial fines levied against the implicated banks but also eroded trust in the financial system. In response to the scandal and growing concerns about the reliability of LIBOR, efforts were made to transition to more transparent and trustworthy benchmarks. The Sterling Overnight Index Average (SONIA) emerged as a leading contender. SONIA, calculated based on actual transactions in the overnight unsecured funding market, provides a more accurate reflection of prevailing market conditions. The adoption of SONIA aims to restore confidence in financial benchmarks, ensuring market integrity and stability.
Royal Bank of Scotland - Fred Goodwin
Fred Goodwin was the Chief Executive Officer of the Royal Bank of Scotland (RBS) from 2001 to 2008. During his tenure, RBS underwent rapid expansion, including the acquisition of several major banks. However, his leadership came under intense scrutiny during the global financial crisis of 2008 when RBS faced significant losses due to exposure to subprime mortgage-backed securities and risky lending practices. This ultimately led to a government bailout of RBS, making it one of the largest recipients of taxpayer funds during the financial crisis. Goodwin’s aggressive expansion strategy and management decisions were heavily criticized, and he faced widespread public and regulatory backlash. He left RBS in 2008 amid the fallout from the crisis and the subsequent nationalization of the bank.
Relates to Corporate Governance Failure
