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Barclays (BCS) Agrees to $100 Million Settlement over Interest Rate Manipulation
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On Monday, Barclays PLC (BCS - Free Report) agreed to pay a $100 million settlement to 44 U.S. states after an investigation into manipulation of Libor (one of the most common benchmark interest rate indexes) by the firm.
Between 2005 and 2009, Barclays schemed to hide the damage of the global financial crisis through the use of false rates. This benefited their own traders while serving as extra burden to entities that had their contracts linked to those rates.
The borrowing rates of the interbank market were evaluated using the submissions of a 16-bank panel. Basically, the daily Libor rate was calculated using the middle eight submissions, and Barclays managers told their employees to submit lower-than-accurate rates.
In doing so, the bank appeared stronger than it actually was, since higher interest rates are generally given to those with higher risk of not paying back the amount, or in other words are in weaker standing.
New York Attorney General Eric Schneiderman stated that “There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the far functioning of financial markets.”
Other banks that have either settled deals or are still being investigated for Libor manipulation include the Royal Bank of Scotland , Deutsche Bank (DB - Free Report) , and UBS Group (UBS - Free Report) , amongst others.
Barclays has seen downward earnings estimate revisions for both this and next fiscal year. Estimates for this year stand at $0.62 in earnings per share, down dramatically from the $1.26 of 60 days ago. Estimates for next year stand at $0.83 in earnings per share, down from the $1.44 estimate of 60 days ago.
The uncertainty that came with Brexit as well as the Bank of England’s decision on August 4 to cut interest rates for the first time since 2009 will hurt Barclays and other U.K. banks moving forward. This, coupled with the settlement and recent estimate revisions paints a dreary forecast for Barclays’ immediate future.
Barclays PLC currently sits at a Zacks Rank #4 (Sell).
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Barclays (BCS) Agrees to $100 Million Settlement over Interest Rate Manipulation
On Monday, Barclays PLC (BCS - Free Report) agreed to pay a $100 million settlement to 44 U.S. states after an investigation into manipulation of Libor (one of the most common benchmark interest rate indexes) by the firm.
Between 2005 and 2009, Barclays schemed to hide the damage of the global financial crisis through the use of false rates. This benefited their own traders while serving as extra burden to entities that had their contracts linked to those rates.
The borrowing rates of the interbank market were evaluated using the submissions of a 16-bank panel. Basically, the daily Libor rate was calculated using the middle eight submissions, and Barclays managers told their employees to submit lower-than-accurate rates.
In doing so, the bank appeared stronger than it actually was, since higher interest rates are generally given to those with higher risk of not paying back the amount, or in other words are in weaker standing.
New York Attorney General Eric Schneiderman stated that “There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the far functioning of financial markets.”
Other banks that have either settled deals or are still being investigated for Libor manipulation include the Royal Bank of Scotland , Deutsche Bank (DB - Free Report) , and UBS Group (UBS - Free Report) , amongst others.
Barclays has seen downward earnings estimate revisions for both this and next fiscal year. Estimates for this year stand at $0.62 in earnings per share, down dramatically from the $1.26 of 60 days ago. Estimates for next year stand at $0.83 in earnings per share, down from the $1.44 estimate of 60 days ago.
The uncertainty that came with Brexit as well as the Bank of England’s decision on August 4 to cut interest rates for the first time since 2009 will hurt Barclays and other U.K. banks moving forward. This, coupled with the settlement and recent estimate revisions paints a dreary forecast for Barclays’ immediate future.
Barclays PLC currently sits at a Zacks Rank #4 (Sell).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>