In London, England because of its lack of regulation, the financial services companies grew and London is one of the centres of the world finances. In London, the major banks submit bids on the cost of borrowing money from each other – this average is called the Libor. Most of the time the rate fits into a very narrow trading range because the banks are not desperate for the funds. All banks need capital or money to exist and grow their businesses, the cost of capital is interest rates and over the years, the Libor rate has seen as the lowest rate and other interest rates are tied to it. You may have asked for a loan and the bank said it was x points above prime. For the international banking community, Libor is the base rate or prime rate.  When banks were doing well, the system worked beautifully. Occasionally, the banks, because in the end they are run by people and most people do not want to show their declines to the public, tried to manipulate the rates. By not allowing the rates to fluctuate, the banks would  not have to show they were not doing as well. The other aspect was to make bets on the direction of interest rates, after the Libor rate was first rigged.

Linking to dividend paying stocks – all the banks that have been fined until the financial crisis were some of the best stocks to own. They were very profitable, were involved in the biggest deals across the world, were able to influence governments and corporations and were on the top of the hill. In turns out, they cheater to stay there and in a manner which materially affects their business. Naturally people have left the company and the company continues in a seemingly lesser light. The question is what to do? if you owned the shares would you keep them? for they still pay dividends. Owning shares in a profitable business that pays dividends is a good thing, but even better is when the company at least tries to stay within the law.

There are more questions than answers, till the next time – to raising questions