Spirit Level... Or Li(e)bor?
There was a time when Libor, and the British Bankers' Association was relevant. As well it should: after all $350 trillion worth of downstream "products" are reliant on it. That's right: $350,000,000,000,000.00 worth of notional assets have their value directly and indirectly linked to what a consortium of BBA member banks sits down every day and tells the world is the cost of unsecured overnight funding. Of course, there are occasional allegations and lawsuits that the entire Libor market is nothing but one massively manipulated cesspool, in which the banks, desperate to give off the impression they are healthy will offer numbers which have no bearing on reality, and which in a world which is now entirely funded by central banks, are just as irrelevant. This, however, is total BS. After all, as we all know, in the past three months, liquidity conditions have tightened massively, an entire country's banking system has officially failed and been bailed out, and everyone is now screaming for more liquidity because liquidity is so obviously tight. Surely this all is reflected in a volatile, and rapid rise in the USD Libor as reported daily by the BBA: after all they do have an upward struggle to regain their credibility, and to restore confidence in the Libor indicator. Well, let's take a look at the historical chart of the benchmark 3 Month Libor, shall we....
Wait, this can't... Europe is imploding, the world economy is crashing, and the Spanish banking sector has failed, and the BBA is telling us that in over 3 months Libor has moved by at most... 3 bps, has actually been unchanged for weeks and weeks on end, and has been used by construction workers in the place of a spirit level?
But, but, this may lead some to believe that all those allegations of Libor market manipulation are....true?! Because if the world is on the verge of collapse and Liebor, pardon, Libor has not budged by 3 pips since the day LTRO2 was concluded, it may, just may, lead some to question just how bad the bank liquidity truly is among the BBA respondent banks.
Fear not, though, we know what will fix everything shortly:
Anthony Browne, a Morgan Stanley executive and former adviser to Boris Johnson, the mayor of London, is on Tuesday expected to be named as the new head of the British Bankers’ Association.
The appointment follows a two-month search by Marcus Agius, chairman of the BBA and of Barclays, one of the UK’s biggest banks. Angela Knight, chief executive of the BBA who led the lobby group through the tumultuous years following the onset of the financial crisis, announced she would step down in April.
He has experience defending the UK financial services industry through his involvement with City UK, a group dedicated to promoting the square mile. Mr Browne helped set up the group and remains a member of its board.
His role at Morgan Stanley – head of government relations for Europe, the Middle East and Africa – should also prepare him for tricky dealings with ministers as he tackles a range of sensitive industry issues, including pay and consumer protection.
Well, if a former Morgan Stanley "diplomat" is about to be placed in charge of Libor, then all is well, and the $350 trillion market is once again in safe, unmanipulated, and fully-credible hands.