In June 2012, Barclays Bank PLC entered into a settlement agreement with the United Kingdom’s Financial Services Authority and the United States’ Commodities Futures Trading Commission that settled Barclays’s role in manipulating the London Interbank Offered Rate, or LIBOR. The Barclays episode, and related scandal, provides an opportunity to examine approaches to financial regulation in the United Kingdom and the United States. This Note uses that opportunity to compare and contrast the approach to financial regulation in the United Kingdom and the United States. In particular, this Note contends that the LIBOR scandal reveals three problems with the then-existing approaches to financial regulation in the United Kingdom and United States. The three issues presented are 1) a problem with the people involved in setting LIBOR; 2) a problem with the publicity that banks face when they submit their rates to LIBOR; and 3) a problem with the way LIBOR is calculated that allows it to diverge too far from market realities. This Note also argues that the “light-touch” approach that characterizes financial regulation in the United Kingdom should be combined with the more intensive approach to regulation found in the United States. The Wheatley Review of LIBOR is held up as an example of this hybrid approach. This Note proceeds by first briefly presenting the history of LIBOR as well as presenting an account of the manipulation. The Note then reviews the structure of financial regulation in the United Kingdom, with special attention paid to the recent Wheatley Review of LIBOR. This Note presents a similar account of financial regulation in the United States, before comparing and contrasting the two approaches. This comparison generates the primary thrust of this Note’s argument that the two approaches should be combined. Before concluding, this Note deals with several counter-arguments. The conclusion then explains how the Wheatley Review embodies the hybrid approach advocated in this Note.
Anything for You Big Boy: A Comparative Analysis of Banking Regulation in the United States and the United Kingdom in Light of the LIBOR Scandal,
Nw. J. Int'l L. & Bus.