Global banks rigged LIBOR, the benchmark interest rate behind hundreds of trillions in loans and derivatives

The number that priced the world

For most of its life, LIBOR was invisible to the people it touched. It sat inside the fine print of an adjustable mortgage, a corporate loan, a student debt, a currency swap, never announced, rarely explained, but quietly setting the price. The London Interbank Offered Rate was meant to answer a simple question: what does it cost a big bank to borrow money from another big bank right now? Multiply that across every contract pegged to the answer and you arrive at the figure that made LIBOR matter: an estimated $300 trillion or more in loans and derivatives keyed to a single daily benchmark.

The way that number was produced is the whole story. LIBOR was not measured from actual trades. Each business day, a panel of large banks simply reported the rate at which each believed it could borrow. The highest and lowest submissions were trimmed away and the rest averaged. The system had an obvious and, in hindsight, fatal feature: the banks whose money rode on where LIBOR fixed were the same banks entrusted to report it honestly, on what amounted to an honor system, with no requirement that the figure match any real transaction.

A number that priced hundreds of trillions of dollars was not measured. It was reported, by the parties with the most to gain from shading it.

Two ways to bend a benchmark

There were really two schemes, with different motives, running through the same mechanism. The first was about profit. A bank's interest-rate derivatives, contracts whose value swings with where LIBOR lands, could be worth a great deal more or less depending on the day's fix. Traders realized that the colleague down the hall who entered the bank's LIBOR submission could nudge the figure a fraction in a helpful direction, and that a fraction, across a large enough book, was real money. So they asked. The requests, preserved in internal messages later published by regulators, were often casual and grateful, one trader offering a submitter a bottle of champagne for a rate moved his way.

The second scheme surfaced during the financial crisis, and its motive was fear rather than greed. In 2007 and 2008, a bank that submitted a high borrowing rate was effectively confessing that other banks saw it as risky and were charging it more, exactly the signal a wobbling institution could not afford to send. So panel banks, Barclays among them, understated their submissions to look healthier than they were. This was not a few traders skimming a derivatives book; it was closer to institutional self-preservation during a panic, which is why it later raised uncomfortable questions about what supervisors and central bankers understood at the time.

Both schemes exploited the same design flaw. Because the number was an opinion rather than a measurement, a dishonest opinion was almost impossible to falsify from the outside. It took subpoenaed emails and chat transcripts, not market data, to prove what had happened.

Barclays breaks it open, and the fines cascade

The dam broke on 27 June 2012. Barclays became the first bank to settle, agreeing to pay roughly $450 million across the U.S. Commodity Futures Trading Commission, the U.S. Department of Justice and Britain's Financial Services Authority. The CFTC's order was blunt: Barclays had attempted to manipulate and made false reports concerning LIBOR and Euribor “on numerous occasions and sometimes on a daily basis” over roughly six years, to benefit its derivatives positions. Within days, the political and reputational shock forced out chief executive Bob Diamond.

What made the Barclays settlement decisive was that it was first, not that it was largest. Once the conduct and the evidence were public, the other panel banks followed. UBS settled for around $1.5 billion in December 2012, Royal Bank of Scotland for about $612 million in early 2013, Rabobank for roughly $1 billion later that year, and Deutsche Bank for about $2.5 billion in 2015, at the time the largest penalty in CFTC history. Added up across regulators on both sides of the Atlantic, the fines exceeded $9 billion.

The institutional response went beyond fines. The government-commissioned Wheatley Review, published in September 2012, recommended taking LIBOR away from the British Bankers' Association, tying submissions to real transactions wherever possible, and criminalizing benchmark manipulation. Those reforms were largely adopted, and the benchmark itself was ultimately retired: LIBOR was phased out between 2021 and 2023, replaced by transaction-based rates such as SONIA and SOFR that are far harder to simply type in.

The banks did not merely pay to settle allegations. They admitted the conduct, and the benchmark they had corrupted was eventually abolished.

The men in the dock, and the convictions that unravelled

Corporate penalties are one thing; putting individuals in prison is another, and this is where the story turns genuinely complicated. The most prominent defendant was Tom Hayes, a former UBS and Citigroup trader who in August 2015 became the first person jailed anywhere for rigging LIBOR. He was convicted on eight counts of conspiracy to defraud and sentenced to 14 years, reduced to 11 on appeal, and served about five and a half years before his release in 2021. Other traders were convicted in later trials, including former Barclays trader Carlo Palombo on the euro benchmark, Euribor.

Then, on 23 July 2025, the UK Supreme Court unanimously quashed the convictions of Hayes and Palombo. It is important to be precise about what the court did and did not say, because the ruling is easy to misread. The justices found that the trial judges had misdirected the juries: they had treated the question of whether a submission reflected the submitter's genuine opinion of borrowing costs as a matter of law for the judge, when it was in truth a factual question that should have been left to the jury. That misdirection, the court held, undermined the fairness of the trials. The Serious Fraud Office decided against seeking retrials.

What the Supreme Court did not do was rule that LIBOR had been honestly set, or disturb a single one of the banks' corporate admissions. This is the nuance the verdict turns on. It is entirely coherent, and correct on the record, to hold both that the benchmark was manipulated, which the banks themselves conceded and paid billions to settle, and that specific criminal prosecutions of individual traders were legally flawed in how they were run. Those are answers to two different questions. The first is about whether the rate was rigged; the record says plainly that it was. The second is about whether a particular defendant received a fair trial for it; on that, the highest court in the UK said no.

Overturning a conviction on how a jury was directed is not the same as finding the rate was never rigged. The banks' admissions still stand.