Notes on a Scandal – The SNAFU with the LIBOR

To the layman, the task of understanding the intricacies of the banking system and financial markets is a challenging prospect not rendered easier by its confusing jargon. As Charlie Brooker recently put it, “ask me to explain what a credit default swap is and I’ll emit an unbroken 10-minute ‘um’ through the clueless face of a broken puppet.” Public expectations of the banking system, aside from access to their hard earned pounds, most centrally revolve around the issue of trust. Trust that in spite of its complexity, the system is adequately regulated with a high level of accountability and appropriate checks and balances.

Back in December 2008 the UK BBA, the leading trade association for the UK banking and financial services sector, tightened regulations designed to re-affirm confidence in the Libor, following concerns that some banks were submitting doctored information. Libor is a standard interest rate agreed by the BBA made up from data supplied by leading banks which is largely the benchmark for most consumer financial institutions from mortgage lenders to credit card agencies. In June 2012, multiple criminal settlements by Barclays Bank brought to light significant fraud and collusion by member banks connected to the rate submissions, leading to scandal that has dominated headlines.

A review of the UK news media back in 2008 exposed concerns that were reported by leading outlets. With this in mind, when Martin Weatley, Financial Services Authority chief, expressed “shock” with recent Libor and interest rate miss-selling, it is not hard to understand the wave of public cynicism converging on the industry. This perceived betrayal of trust extends past consumer confidence in the system (a fact that will no doubt bolster political positions promising to be ‘harder’ on the City), it is also central to the consumption of news information about the system. The general bafflement about the workings of the markets leads most news consumers to rely on the industry and financial experts to inform and educate. For this knowledge flow to work, the audience needs to trust in the credentials of the experts, whether they agree with what is said or not, and the experts need to inform in a clear, understandable manner. When public expectations of trust are put in jeopardy it does not take much effort for an activist (speaking from any position in the political spectrum), politician or even blue collar hero to add to a negative narrative about the banking industry. It is much harder for a communicator to re-enforce confidence in the system.

Part of addressing this issue and formulating a coherent message requires a confident understanding of the media playing field and the stakeholders who are most influential in the debate: Which stakeholders most frequently inform discussion of the banking system? Who is linked to themes such as consumer confidence and trust? Building confidence through a consistent communications strategy with clear messaging can be challenging when the blame game between government and industry obfuscates news of a scandal. In spite of the political theatre, endeavouring to improve communications is not a thankless task – especially if professionals adopt measurement-driven decision making as a means to deploy resources efficiently and effectively.

It is common knowledge that history should allow for us to learn from past successes and mistakes – an adage all too infrequently adhered to. BBC Radio 4’s The Long View compared recent events at Barclays to the 13th century story of Richard Lyons. Like former Barclays CEO Bob Diamond, financier Lyons was brought before parliament to explain some ‘dubious’ financial practices he had used to circumvent the prohibition of usury – the practice of making loans with excessive interest rates. As we find with the Libor story in 2012, the Lyons case came amid an economic crisis and misgivings about the influence of the financial sector on politics. One does not have to reach back as far as that, but building an archive of media evaluation data can provide history lessons and highlight successes that inform communications strategies and protect budgets. Those in the financial sector yet to subscribe to this knowledge bank should jump aboard now.

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