If you’ve come across Libor in your personal life, there is a good chance you have, or had, a mortgage or indeed any sort of loan with a United Kingdom bank.
The London Interbank Offer Rate (Libor) – essentially the average interest rate at which several banks in the City of London would lend to each other – was, until 2021, used as a reference rate for any number of financial products around the world, from consumer loans to derivatives. “Libor plus x per cent” was as widely used to set interest rates on products worth trillions of dollars.
Yet it became mired in scandal amid accusations of manipulation during the global financial crisis. A string of traders were convicted, and banks took collective fines of close to $10 billion.
One of those traders, Tom Hayes, became the poster boy for the scandal. The former UBS and Citigroup dealer was convicted in 2015 of eight counts of conspiracy to defraud – later reduced to 11 on appeal. It was a notable sentence – one of the longest for white collar crime in the UK up to that point.
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Hayes protested his innocence throughout the process, eventually appealing to the supreme court. On Wednesday, the court quashed his conviction, along with that of another trader, because the juries in both cases had been misdirected by the judges at both trials.
It’s a stunning move that throws a new light on the case that had held the City of London’s attention for more than a decade. It also raises questions about the convictions of other traders who were found guilty of offences tied to the Libor scandal.
The Hayes case in particular threw a light on the inner workings of some parts of the big banks. The scandal fed into the worst perceptions of bankers at a time when public sympathy for city boys was in even shorter supply than usual, coming as it did during the depths of the financial crisis and what has since become known as the Great Recession.
It also renews the now almost two-decade-old question that also has ramifications for the Republic and the apparent lack of convictions for bankers involved in the financial crash in this country: at what point does a bad business decision become a law-breaking one?
