L3 - A Detailed look at the Money Market

Question 1

What is the Role of the Money Market?

Answer 1

We have seen that the purpose of money markets is to facilitate the transfer of short-term funds from agents with excess funds (corporations, financial institutions, individuals and government (central and local)) to those market participants who require short term funds .

For financial institutions and to some extent other non-financial intermediaries, money markets allow for the execution of:

• Fund raising
• Cash management
• Risk management
• Speculation or position finance
• Signalling –> authorities signalling their intentions
• Providing information on prices

Question 2

What are some major changes to the money market in recent years?

Answer 2

The role and structure of money markets has undergone major change in recent years:

• Technological developments.
  
  • computers have made it extremely easily to participate in the money market
• Financial deregulation .
  
  • efficient operation of markets is not compatible with heavy regulation - even if people think banks holding peoples money should be regulated
  • regulation also brings the incentive to find ways around them
• Increased international mobility of capital
  
  • changing exchange rate arrangement
• diminishing policy autonomous - central banks have less and less power and market now general rule. central banks can still influence the market but now they have to work through it, cant work independently form it any longer

Another role for the money market is to serve policy objectives

Question 3

Why hasthere been an increasing importance of National Debt in the past few years?

Answer 3

An important element of money market (and debt market) operations concerns the raising and management of government debt:

• back when Keynesian times and the 60-80s people didnt care about government debt - people saw it as a debt that owe itself (only a redistribution of wealth)
• now the size of debt is incredible important. if the national debt (accumlative outstanding national budget deficits) goes on rising, sooner or later markets are going to question the ability of the government to repay the debt
• if the markets stop providing fund the government can no longer fund their expenditures and cause the economy to collaspe i.e. Greece
• this tells you that monetary anf fiscal policies are inextricably linked

Question 4

What are the different segments of the Money Market?

Answer 4

Just to recap, we have seen that the money market consists the market for short term (up to one year maturity) funds.

The major segments of the money market are:

• The interbank market
  
  • where banks and some non-bank financial intermedaries e.g. insurance companies do business
  • settle contract between themselves and with the central bank
  • the overnight market is a large section of this
• The primary market
  
  • where new funds are raised and securities are issued and sold
  • discount market –> where government funds it sort term borrowing from the sales of treasure builds
• The secondary market
  
  • sellingv and buying of existing bills and securities
• The derivatives market
  
  • where risks are hedged (forwards, futures, options and swaps)

Question 5

How do the Interbank market function?

Answer 5

he interbank market is the global network utilized by financial institutions to trade currencies between themselves. While some interbank trading is done by banks on behalf of large customers, most interbank trading is proprietary, meaning that it takes place on behalf of the banks’ own accounts. Banks use the interbank market to manage exchange rate and interest rate risk.

Question 6

How do bank interact in the interbank Market?

Answer 6

• The interbank market is where banks lend to each other.
• Central Banks major role is the implementation of the government monetary policy - interest rate (Discount or bank rate) - this changes the spread throughout the economy
• adjusting the amount of money in the economy - this is now done through Quantitative easing
• Some, though not all, central banks require commercial banks operating in their country to hold a minimum level of reserves on deposit with the central bank. This is not the case in the UK, ECB, Netherlands etc. (since 2009) - this is because its not effective as monetary control
• Banks now set voluntary reserves and deposit them with the Bank of England - this is used as clearing funds to facilitate transaction between customers of different banks - instead of a direct change it just adjusts their respective bank reserves at the BOE
• banks try to stay close to their targets and earn interest on their deposit a the BOE- sometimes the rate of interest can be negative to encourage banks to increase their lending

Question 7

What is Quantitative Easing?

Answer 7

• Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply and encourage lending and investment.
• When short-term interest rates are at or approaching zero, normal open market operations, which target interest rates, are no longer effective, so instead a central bank can target specified amounts of assets to purchase.
• Quantitative easing increases the money supply by purchasing assets with newly created bank reserves in order to provide banks with more liquidity.

Question 8

What has happened since 2009 since the introduction of QE and interest rates on excess reserves?

Answer 8

• banks were no longer required to set out a target and so were no longer penalised for holding excess reserves.
• Indeed, they were proportionally compensated for holding all their reserves at the Bank Rate (the Bank of England now uses the same interest rate for its Bank Rate, its deposit rate and its interest rate target).
• In the absence of an agreed target, the concept of excess reserves no longer applies to the Bank of England so it is technically incorrect to call its new policy “interest on excess reserves” as it sometimes referred to in the literature.

Question 9

What are the different types of instruments in the Money Market?

Answer 9

We can view the different money market segments in terms of instruments traded. The main instruments consist of:

• Treasury Bills and other Government Securities –> these are bonds that only have 12 month maturity or 12 months left on there maturity (government bonds can move from the debt market in the money market at this time)
• Interbank Market Loans
• Commercial Papers
• Certificates of Deposit
• Repurchase Agreements (Repo’s)
• Repo and Reverse Repo Markets
• International Money Market Securities

Question 10

What is the overnight market?

Answer 10

It’s the area of the money market with the shortest term loans, in which lenders make funds available only overnight, meaning the borrower has to repay the loan - plus interest - at the start of business the following day.

Question 11

What are Tresury Bills?

Answer 11

Treasury bills are the instrument through which the government finances its short term borrowing.

• Consequently they are regarded as riskless securities.
• The interest rates on T-Bills serve as benchmark default free interest rates.
• In the UK, T-bills are usually issued for 91 days but they are sometimes issued for 28 days, 63 days and 182 days.
• September 2019, the amount of 3 month T-bills outstanding was 11.5 billion but in April is was 6 billion –> the markets fluctuate alot

Question 12

How are T-bills issued?

Answer 12

T-bills are always issued at a discount and are therefore pure discount securities –> carry no interest rate/coupon - issued at a discount so less than face value

• You buy the asset at a lesser value and at maturity you sell it at its value, and capital gains made are your profit

T-Bills are issued via a regularly scheduled (Friday) sealed bid auction

Bidders submit competitive and non-competitive tenders to the DMO (debt management office)

• bids arent placed on prices but on yields
• however prices and yields are related and a particular yield implies a particular price

Question 13

What is a Sealed-bid Auction?

Answer 13

A sealed-bid auction is a type of auction process in which all bidders simultaneously submit sealed bids to the auctioneer so that no bidder knows how much the other auction participants have bid. Sealed bid refers to a written bid placed in a sealed envelope. The sealed bid is not opened until the stated date, at which time all bids are opened together. The highest bidder is usually declared the winner of the bidding process.

Question 14

What are competitive bids?

Answer 14

• A competitive bidder submits the amount that is desired to be purchased as well as the price the bidder wants to pay. The price is set in terms of yield.
• The price in the auction is set at the average of all accepted bids. –> this is the price charged to non-competitive bidders
• However we know that markets flucuate so this means that not all competitive bid are accepted –> if they arent all accepted, non-competitive bidders get nothing
• if there is any left over, non-competitive bidders get all they asked for or a least a proportion of it

This implies that not all non-competitive bids are accepted at the average price of the competitive bids tendered

• the main competitive bidders are big banks and financial intermediaries

Question 15

What is a rule set for competitive Bids?

Answer 15

As a rule, competitive bidders submit more than one bid with different prices and quantities in different tenders. However, in well-developed markets, limitations are placed on the amount allocated in a single auction to competitive bidders.

• The aim is to prevent any single competitive bidder influencing the market and squeezing other competitive bidders out.

At the auction the highest competitive bids are accepted first. The lowest rejected bid yield, that is, the highest accepted bid yield, is called the stop yield.

• The corresponding price implied by this yield is called the stop price.
• Be careful – The lowest competitive bid implies highest competitive yield so the government’s borrowing costs are minimised. This, you will recognise, is an example of price discrimination –> get it wrong you will pay too much
• At higher rates of maturity the price of the bond falls

Question 16

What are non-competitive bids?

Answer 16

• A non-competitive bidder specifies only the amount of the security the bidder wishes to buy without specifying the price. These bidders automatically pay the defined price by default.
• these are more retail customers - those with less expertise, but still need the liquidity and buy in low volumes
• Later, all competitive bids are ranked in terms of the bid yield and the average bid yield, weighted by the amount allocated at each yield, is calculated.
• The price in the auction for non-competitive bids is set at the average of all accepted bids. This is the price all non-competitive bidders pay by default.

Question 17

How can the bidding for T-bills be represented on a graph?

Answer 17

Question 18

What is the ‘tail’ and the ‘cover’ of T-bills?

Answer 18

• The discriminatory nature of the T-bill auction implies that it is characterised by a tail’ and a ‘cover’.
• A tail is the difference between the stop yield and the average yield.
• a small tail implies that all bidders have the same view of the market, in that case they would all pay a pretty similar price
• A cover is the ratio between the total amount bids (competitive and non-competitive) submitted and the total issue, that is, the total amount of accepted bids –> total supply
• if there is a large cover it implies that it is an active market.
• the cover can also be interpreted as the difference between the maximum and minimum bid yield
• the larger to cover the smaller the tail –> market is more efficient

Question 19

How do you calculate the yield of T-bills?

Answer 19

P= M/[1 +r(Nsm/365)}

Where P = current price

M = value at maturity

Nsm = number of days between sale and maturity

r = the quoted yield on the T-bill

• how much you would pay for the nominal value

Question 20

How do you calculate the discount T-bills are quoted at?

Answer 20

• By convention T-bills are not quoted on the basis of yield, they are quoted on the basis of a discount rate. THe issues price of a T bill is the different between face value and the discount.
• With the discount rate (d) and the discount (D) we have

D = M(d)(Nsm/365)

P = M - D = M - M(d)(Nsm/365)

• d gives you the maturity you would earn per nominal value - your rate of return

Question 21

How do you calculate the yield of a T-bill sold at a discount?

Answer 21

r = D(365)/(P(Nsm)

r = d/(1-d(Nsm/365))

Question 22

What are some major characteristics of the interbank market?

Answer 22

The interbank market is where banks lend to each other

• The transfer of immediately available funds;
• Short time horizons (usually ranging from overnight to fourteen days; –> short end is more active
• Unsecured transfers –> no security if institute goes bust so risky, built on trust - banks very rarely go trust
• Only wholesale deposits are borrowed or lend

Individual banks have the possibility to lend to each other and so increase their earnings

Question 23

What is the Interbank rate linked to?

Answer 23

The money market rates

• the interbank interest rates give an indicator of the direction of the market change
• interbank interest rates can change instantenously, this can have an influence throughout the market, as they influence the terms of lending through the market

Question 24

Why are interbank transfer unsecured?

Answer 24

To maintain the speed of transfer and the costs of transfer down

• Without the interbank market, many banks would go bust, they have made loans, so when they cant provide the funds, they need to borrow it from other banks - dont have time to discuss security as they need the money now, and the next day the bank lending could be the one borrowing
• The Credit risk in the interbank market is reflected in the interbank rate

Question 25

How are interbank deports different to other instruments traded in the money market?

Answer 25

interbank deports are not negotiable

• negotiable doesnt mean they cant barter the price it means there is no secondary market, and they are not traded after they are issued
• it is simply a bank acquiring extra liquidity by putting up a call, which other banks answer

Question 26

What is Commercial Paper?

Answer 26

• Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities. Maturities on commercial paper rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.
• The major issuers of commercial paper are financial institutions such as finance companies and insurance companies - normal very large, established, with a good solid credit rate (AAA)
• Unsecured - solely on trust
• Commercial paper differs from commercial bills. –> they normally run longer about 6 months, and commercial bills are the way organisations fund their borrowing

Question 27

How are Commercial Bills used by businesses?

Answer 27

• Say if a manufacturing firm buys raw materials, coverts them into a product and sells to a retailer, but the retailing doesnt have the cash to pay you now (as they need to generate revenue through sales) so the manufacturing gives them a trade discount and rights up a bill of exchange that is in essense an IOU for the money, but if the manufacturing firm need money now, a bank will stamp the back of it and sign it making it an accepted commercial bill
• This can be sold or passed on (the bank will buy it off you), so the manufacturing firm gets their money to buy raw materials and the retailer has time to sell their product and pay the bank
• its basically debt factoring with a bank

Question 28

What are Certificates of Deposit?

Answer 28

• loans in the interbank market can be withdrawn without notice (or with very little notice). To give banks greater continuity over borrowed funds, certificates of deposit (CDs) were introduced in the 1960s.
• By market convention it is a short-term marketable instrument with a maturity up to five years with the vast majority of certificates are issued for periods of less than six months.

They can be on either a fixed or floating rate

• They are negotiable instrument with a secondary market, this means they can be used for liability management ( you dont need to hold them till maturity)
• To facilitiate better liability management, banks will sell and hold different CD with differing maturities

Question 29

How is the interest rate determined for Certificates of Deposits?

Answer 29

The rate of interest is closely related to the current market rate on sterling interbank deposits of a corresponding maturity. They are issued at LIBOR + x bps. (floating)

• Fixed could be based on current LIBOR

Question 30

Where are Ceritificates of Deposit mainly issued?

Answer 30

• Certificates of Deposit are issued in many centres around the world, but the prime international centre is in London.
• The Bank of England authorises major banks to issue CDs in a variety of currencies, US dollars, yen, Australian dollars, Canadian dollars etc. –> must have approval of the appropriate central bank e.g. US dollar need approval of the FED (main on is the FED bank of New York)
• Certificates may be issued in other currencies too, provided the appropriate central bank is aware and does not object.

Question 31

How were Certificate of Deposit originally collected?

Answer 31

• Originally, CDs were all issued on security paper and were high value bearer instruments that had to be collected by messenger from the issuer.
• However, it is now usual to issue CDs in electronic (book entry) form, and to use an international clearing system (e.g., Euroclear) to arrange the electronic book transfer and custody of the securities.
• The Bank of England now has recently introduced a safe keeping function, in which they will store your CD instead of you having to keep a physical copy on you
• While paper copies still exist, the switch to electric book entry forms will mean they will be gone soon enough

Question 32

What are Repurchase Agreements?

Answer 32

• A repurchase agreement is simply an agreement to buy securities from a seller (borrower) with an agreement that will be repurchased at some specified future date at a price agreed today –> a loan backed by a security –> if you default i can sell it
• A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis ( can last a few months but this is rare), and buys them back the following day at a slightly higher price.
• That small difference in price is the implicit overnight interest rate.

This is the margin where dealers make their profit the difference between the buying and selling

• Repos are typically used to raise short-term capital. They are also a common tool of central bank open market operations.
• For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.
• Repos are alternatives to money market transactions but they are still classed as a money market instrument to raise short term forms
• These can be real securities or virtual security issued by a reputable bank whereas the securities act as the collateral

Question 33

What are Reverse Repos?

Answer 33

Reverse Repo’s involve the purchase of securities by one party from another party with the agreement to sell these same securities back at a later date at a price agreed today.

Question 34

How has the Repo Agreement Markets grow in recent years?

Answer 34

Repo and Reverse Repo markets and their participants have grown rapidly in recent years, especially because of increased sensitivity to interest rate risk and the opportunity cost of holding cash.

• This is also because we can transfer money internationally in the ‘international wash basin’ –> we transfer money internationally and they move instantenously in response to expected interest rates

Participants include central banks, commercial banks, money market funds, non financial institutions and so on.

Question 35

How do Central Banks use Repurchase Agreements?

Answer 35

• Central banks also use the Repo and Reverse Repo markets as an instrument of monetary policy to provide stability in the money markets as part of their open market operations. (adjusting deposits help by financial intermediaries and banks)
• A Repo puts money into the banking system when a liquidity shortage arises (is arising) whereas a Reverse Repo withdraws money from the system when there is an excess of liquidity (an excess of liquidity is emerging).
• Central banks therefore uses Repo’s and Reverse Repo’s to adjust liquidity levels in the market.
• The amount of money involved in a Repo by a central bank is 10 million units of a currency and maturity is usually 1-15 days

Question 36

What can Repo Rates effect?

Answer 36

Since Repo rates can influence money market prices and yields, Repo’s are regarded as money market deals.

Since the value of securities in a Repo (Reverse Repo) can fluctuate during the term of the agreement, the amount of the loan is less than the current value of the securities. The value of the deduction from the collateral to make Repo possible is called a Haircut or margin.

Question 37

What is a Haircut in a Repo?

Answer 37

A haircut has two meanings. The term haircut is most commonly used when referencing the percentage difference between an asset’s market value and the amount that can be used as collateral for a loan.

• There is a difference between these values because market prices change over time, which the lender needs to accommodate for.
• For example, if a person needs a $10,000 loans and wants to use their $10,000 stock portfolio as collateral, the bank is likely to recognize the $10,000 portfolio as worth only $5,000 in collateral. The $5,000 or 50% reduction in the asset’s value, for collateral purposes, is called the haircut

A Haircut is part of a broker/dealer’s portfolio (its their profit) that cannot be traded. Instead is held as capital to act as a cushion against loss. The Haircut therefore offers some protection against default..

Question 38

What is LIBOR?

Answer 38

• LIBOR is an acronym and stands for the London Interbank Offered Rate It is the average rate of interest at which banks borrow funds from each other, in marketable size, in the London interbank market. –> not just sterling it also used 5 other currency such as the dollar and the euro
• Formerly LIBOR or was referred to as BBA LIBOR reflecting the fact that it was released to the market by the British Bankers Association and the news agency, Reuters. It is now formally referred to as ICE (intercontinental exchange) LIBOR.
• Although ICE now set it, it is still derived the same way –> at 11:45 GMT, LIBOR is released the market - a select group of bank are polled just at 11 and are posed the question “at what rate could you borrow for if you were asked and give an interbank loan” –> this info goes to ICE and they calculate a trimmed mean (throw away outliers) which becomes the LIBOR
• The LIBOR went through a significant change in recent years because it was rigged - at the moment LIBOR has a limited life and wont be around for a lot longer
• Though ICE LIBOR is accepted globally as a benchmark rate, there are other similar regional interest rates that are popularly followed across the globe including: European Interbank Offered Rate (EURIBOR) Tokyo Interbank Offered Rate (TIBOR) Shanghai Interbank Offered Rate (SHIBOR) and Mumbai Interbank Offered Rate (MIBOR)
• it tells you that interbank rates of the LIBOR are very important in the operation of all the interbank markets

Question 39

What is the BBA?

Answer 39

• The British Banking Association
• It really an exclusive club/pressure group - it tells you where it is centrally located but consists on 200 banks and office in 150 global financial centres
• 8% of syndicated banks global are members
• “meant” to ensure the conduct of banks
• the responsibility of setting the Libor was taken off the BBA and taken over by ICE which is the parent to the NYSE and 20 other stock exchange
• The BBA use the libor to set their interest rates

Question 40

What are eurocurrency markets?

Answer 40

As well as the whole range of money market instruments that facilitate borrowing and lending in domestic currency, in recent years some of the fastest growing markets have been the ‘eurocurrency’ markets.

These are markets when borrowing and lending takes place in a currency other than domestic currency. Apart from this, eurocurrency instruments are pretty much identical to other money market instruments

Question 41

Why has the Eurocurrency market been so successful?

Answer 41

Long term development of the eurocurrency market has been propelled forward by the ability of eurobanks to offer their services at more competitive rates than domestic institutions. –> in some markets they might have economies of scales

Eurobanks are banks which specialise in eurocurrency business. They therefore transact business between surplus and deficit units which involves the creation of assets and liabilities similar to domestic money market transactions

• banks gain revenue from surplus funds and deficit units have access to an additional source of borrowing which enhancing competition
• Only wholesale deposit figure in the money market transaction in the euro just as much as they do in london –> only transaction of upwards of a million pounds, so markets are only open to government and large companies with a suitable high credit rating

Question 42

What are the different Eurocurrency Liabilties?

Answer 42

Growth of the market was influenced by the growth of eurocurrency liabilities, especially:

• Euro Certificates of Deposit –> Same as other CD
• Interbank Placements –> short term this can be overnight but up to 7 days is common
• Time Deposits –> similar to CD, in that they have a fixed term, but not negotiable, therefore hold a higher yield as you can get your money back from a CD
• Call Money

Question 43

What are the different Eurocurrency Assets?

Answer 43

Growth of the market was influenced by the growth of eurocurrency assets, especially:

• Euro Commercial Papers (Euro CPs) – These are securitised short term bearer notes issued by well-known large corporations with a strong credit rating. They are issued with short term maturities to provide short term investment opportunities with a broad currency choice. Usually pure discount securities
• Syndicated Eurocurrency Loans – These are related to bank lending of eurocurrency deposits to non-financial intermediaries. Since they are non-negotiable, banks hold them as part of their portfolio until maturity.
  
  • loans are syndicated to spread risk, as if open party defaults it wont collapse
• Euro Notes – These are unsecuritised short term debt instruments (loans) usually running for a year. They substitute for non-negotiable loans

Question 44

What are bearers instrument?

Answer 44

A bearer instrument is a document that entitles the holder of the document rights of ownership or title to the underlying property, such as shares or bonds. Unlike normal registered instruments, no record is kept of who owns bearer instruments or of transactions involving transfer of ownership, enabling the owner to deal with the property anonymously. Whoever physically holds the bearer document is assumed to be the owner of the property, and the rights arising therefrom, such as dividends.

Question 45

What is the key Eurocurrency Rate?

Answer 45

• Libor is undoubtedly the most widely quoted interest rate globally and we come to this in a moment. However, other rates are also important and there are several important Euro rates that we now turn to.
• The key ECB rate is the rate on its Main Refinancing Operations (MRO) which provides the bulk of liquidity to the banking system.
• This short term money and interest rates and the Governing Council of the ECB ensures that these are aligned with the ECB’s monetary policy.
• The other key operational interest rates are the Marginal Lending Facility which offers overnight credit to banks and the Deposit Facility which banks may use to make overnight deposits with the eurosystem.
• These two rates form a corridor within which overnight rates in the money market might fluctuate. –> if they move outside this corridor arbitrage is possible, companies would borrow from the central bank and lend outside, or borrow outside and lend to the central bank

Question 46

What are some other important Eurocurrency money market rates?

Answer 46

• EONIA (euro overnight index average) –> effective the reference rate for the Euro, and is computed daily as an average of rates submitted to them from a group of banks
• Euribor (euro interbank offered rate) –> rival to libor, it a benchmark rate for large unsecure money, the covers rates for longer than overnight and computed a similar way to the EONIA
• EUREPO–> This is Repo market reference rate for the euro for difference maturities. EUREPO is the benchmark rate of the euro Repo market
• Libor –> is an important reference to banks globally and shows the cost of raising funds in London immediately. The rates are numerous banks are therefore tied to Libor, particularly the rate for three month deposits.

Question 47

Why is the LIBOR so important?

Answer 47

• largest spectrum of rates across the board, used in a variety of transactions (swaps, loans, floating rate notes
• because so much business is concentrated in London its is a truly international rate - that doesnt mean that we dont include international rates –> we take a weighted average where London is weighted more highly when calculating ICE LIBOR

as it is an international benchmark rate that means it involved more wide spread dissemination, beyond the currencies that participate in LIBOR

• all the banks that contribute to the setting of LIBOR all have signficant present in London –> all big banks, all do business together and all “trust” each other
• Can even effect something as small as your credit card interest rate
• It differs from the Central Bank rate which show what they think the interest rates should be at that moment in time whereas LIBOR is a metric that shows an average rate that banks are saying they can do business at

Question 48

What are some issues with LIBOR?

Answer 48

• Its not really based on data, it based on opinion
• based on everything we have been told about it, it is extremely susceptible to manipulation –> what makes banks submit accurate information - do they really “trust” each other
• LIBOR is used to price instruments created by the banks –> banks have a vested interest in what rate LIBOR turns out to be - but all done on “trust” which is okay when everyone does the right thing

Question 49

What happen surrounding LIBOR during the Financial Crisis?

Answer 49

• In the Financial Crisis, some banks were sumbitting wholly accurate information - the governing system surrounding LIBOR was weak - the Wall Street Journal started investing this
• The report they submitted, led the bank involved to be subject to regulatory and scruntiny in investigation –> revealed serious evidence of misconduct with banks giving false information, however they were so good at it no substantial evidence was found till 2012
• Once the Banks were found out to be manipulating the data, Barclays, RBS, HSBC and a few others faced very large fines –> Barclays was fined in 2012 £85 million –> however they agreed to an early settlement and got a 30% discount on the fine - but then the DoJ in the US fined them a straigh $360 million
• George Osborne the ex-chancellor lauched an investigation - said the BBA should have known what was going on
• Concluded that LIBOR need taking away from the BBA and giving to another exchange (ICE) on the 1st Feb 2014 –> other than that nothing changed –> its open to the same abuse!!
• the FCA in the UK in 2017, announced that in 2021 ICE LIBOR is being fazed out
• Known one knows what going to happen as we need an international benchmark rate - a few ideas have been submitted so far to no avail