LIBOR Scandal Rocks Global Confidence and Exposes Glaring Holes in Compliance Training Programs
The global banking industry appears to be so all-encompassing and dominating that nothing can call its credibility into question. Unfortunately, time and again history has proven that its foundation is much more tenuous than those first impressions. The fragility of its structure is once again called into question with the recent breaking of the LIBOR scandal.
While the full implications of this latest debacle are not yet fully known, the Libor Scandal is Hurting Confidence. At the center of the scandal is the unethical manner in which key benchmark interest rates were manipulated by some of Barclay's investment banking staff, to the tune of some $550 trillion in interest rate derivatives contracts.
Richmond Federal Reserve Bank President Lacker "...told Reuters the procedures used for determining the rate, in which financial institutions submit borrowing cost estimates rather than their actual borrowing rates, was ripe for abuse." On the surface, it might appear that such leniency was designed to give individual institutions a "narrow margin" of freedom so they would not be completely stymied in red tape. Ironically, and not all too unpredictably, that narrow causeway has created an ocean wide floodgate of controversy and betrayal because a few chose to abuse the loopholes in the system.
The key question then becomes, how could this have been prevented? The answer is simpler than you probably imagine--training in code of conduct and ethics might have equipped the guilty parties in this case with the tools they obviously needed to make more righteous decisions.
Surprisingly so many of life's conclusions do not exhibit a clearly moral or immoral decision at the onset. As adults, we like to tell ourselves that we think before we act, put others before ourselves, and do not succumb to peer pressure. Reality, however, is much more difficult to live than we assume. These nebulous situations can be cleared up with a definitive code of conduct and an examination of ethical practice. In fact, every financial institution has such expectations in place; however, these noble parameters will not do a thing if employees are not properly trained.
According to “The Libor Scandal: it can’t just be bad apples," "the problem is institutional and systemic: bad systems convince good people they are doing good even when they are clearly doing the opposite." If Barclay's is truly a bad system, then no training would have prevented any of this because the corruption would come from the top down. We may or may not ever know. However, your institution has no desire to be manipulative, corrupt, or fraudulent. As a result, you must train your employees as to the stringent code of conduct and ethics that will be maintained in your institution.
We at Vast Talent understand the unequivocal necessity for areas of compliance, whether that be risk management, finance, or anti-money laundering. After all, what single company has the right to shatter the confidence of the world? Please contact us to design the training program that will keep your organization out of the news.