We live in interesting times, a period of no shortage of scandals.
The latest is the Libor-rigging affair that has claimed the heads of Bob Diamond, the Barclays chief executive, and Jerry del Missier, the British bank's chief operating officer. The papers and TV channels are full of it.
You may wonder what the fuss is about. Isn't it just an obscure matter involving a few banks. Plus it all happened in 2008, a lifetime ago at the pace that the world of finance moves these days.
Libor, the London interbank offered rate, is the rate at which banks think they can lend and borrow money among themselves. The calculation is done for each of 10 currencies and 15 loan maturities (from overnight to 12 months), so 150 Libors are published daily: overnight sterling Libor, one-week euro Libor, one-month yen Libor, three-month US-dollar Libor, and so on.
There are variants of Libor such as the Tibor (Tokyo interbank offered rate) and Eibor (Emirates interbank offered rate). Libor reigns supreme worldwide due to the sheer size and liquidity of the money market in the City of London.
Higher Libor indicates higher risk/lower liquidity and vice versa. That single number gives everyone a sense of the demand and supply of loan money. Simple.
The Libor is a universally accepted benchmark. Hundreds of billions of dollars of loans - mortgages, credit cards, project financing - are based on this rate.
Worldwide, effectively this sets the cost of debt. There is about US$800 trillion worth of assets indexed to Libor.
So given that the Libor rate is so important, why would anyone want to tamper with it?
In the case of Barclays, rates are alleged to have been low-balled, apparently at the behest of the UK government, which wanted to calm the market after the Lehman Brothers collapse. The bank may have benefited financially, as it makes tons of money on derivatives contracts priced off Libor.
Now imagine the impact if the Libor was false. It means that the market was fooled into believing that risk was lower and the cost of lending was lower. Banks may have lent at an artificially lower rate, losing potential profits.
The biggest casualty is not bond prices or bank profits. It is credibility, something that has suffered massively at every stage of this four-year-old financial crisis.
Libor is not something just between banks, or between banks and their high-net-worth clients. It affects retail customers; employees, homeowners and pensioners. It also affects monetary policy.
If lenders, borrowers, analysts, regulators and central banks think that banks cannot be relied upon to submit proper numbers, then we have a crisis of confidence in the rate.
This scandal could go global and you may see one bank after another being investigated and possibly a raft of chief executives resigning. Watch this space.
It can get worse. This scam affects hundreds of thousands of customers and we are looking at many complex multimillion-dollar class-action lawsuits against banks.
Clients may also want to walk away from contracts linked to Libor.
The basic issue with Libor is that the system is broken. The rates are just estimates, and forecasting becomes genuinely difficult when markets are panic-stricken and illiquid. Reforming the system will take time, and investigations will drag on for many months.
This is all very newsworthy, which is why I do feel bad for the celebrities of the world - the bankers are (again) stealing the limelight. Perhaps Katy Perry et al should change careers?
Binod Shankar is a chartered financial analyst and has spent 14 years in the region. He is the managing director of Genesis Institute, a financial training company based in Dubai
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Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.
Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.
Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.
Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.
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1 tbsp Spirulina powder
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½ cup fresh spinach leaves
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2 crushed ice cubes (optional)
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Blend all the ingredients together on high in a high-speed blender until smooth and creamy.
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