Are Big Banks In More Hot Water? (BAC, C, UBS)

U.S. regulators are now investigating whether some major banks manipulated Libor leading up to the financial crisis and throughout it. Regulators are narrowing in on Bank of America BAC, Citigroup C, UBS UBS and others for allegedly colluding to manipulate Libor for the purpose of improving the appearance of their credit quality. Gone are the days when the word ‘cartel' made people think of drugs and oil. Now some of the biggest banks in the world are being accused of creating a global cartel to control Libor, which would affect how banks report their borrowing costs, according to the article. The Securities and Exchange Commission and U.S. Justice Department are investigating whether the banks understated their borrowing costs which in effect, makes their balance sheets and liquidity look better than they actually are. Because loans and derivatives are closely tied to Libor, this could have affected trillions of dollars. The implications? Derivative contracts may be mispriced, trust in the markets will continue to be tainted, and the banks involved will receive more bad press.