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Brentwood Borough Council

FOI 6632

Impact of Libor


UK local authorities had in excess of £31 billion invested in banks, building societies and money market funds as at 2008/09 when the Icelandic crisis saw taxpayer monies frozen in offshore accounts. The local government pension fund is £180 billion, with total UK pension fund assets of approximately $3 trillion.

LAPF has given advice to pension fund managers to determine the impact of LIBOR on pension funds.

Since the LIBOR scandal broke last year, we know that LIBOR was rigged for a period of 5 - 7 years, and earlier IMF research by Randall Dodd indicated LIBOR was artificially manipulated lower by
30 basis points or 0.3% for a period of 3 years +, reducing the interest payable on taxpayer investments.

Where investment returns are pegged to the LIBOR rate, moving the needle 1 basis point on a £1 billion investment would result in changes to the annual return on investment of +/- £100,000.00 -
adversely affecting public finances and the ability to maintain public services in a time of austerity.

I am aware the SFO are currently investigating numerous banks to determine the full impact and extent of LIBOR rigging, and a parallel market fixing case is working its way through the EU.
However as yet considerably less attention has been given to identifying potential victims of LIBOR fraud.

One of the principle victims of LIBOR fraud is local authorities and public institutions with billions of pounds of surplus funds and pensions invested - with returns and pension fund management
fees pegged to the manipulated libor rate.

In recent weeks we have seen USA municipalities of Houston and Philadelphia file law suits against 16 global banks related to libor manipulation and civic finances.

Please provide copies of: Treasury Management/ Legal/ Accountancy and Financial advice and opinion provided to Brentwood Council (including council minutes) in relation to:

1. The scale of actual or potential LIBOR manipulation undertaken by UK, EU and global banks, to which the Council has financial exposure.

2. The actual, or potential impact of LIBOR manipulation upon Council managed investments, savings, pension funds, interest rate swaps, derivatives, and other interest hedging products pegged to the LIBOR rate.

3. DCLG, Treasury or Government advice on the scale of LIBOR manipulation, its actual or potential impact to local government, and options for legal recourse to recover lost taxpayer funds.

4. Minutes of relevant council meetings where LIBOR and Brentwood's response to LIBOR market manipulation was discussed.


Assessing the impact of the LIBOR rate fixing scandal on Local Authorities will be fraught with imponderables.

As yet it is impossible to ascertain the level and degree of the financial loss or indeed gain that may have resulted from a given transaction on a given day without placing the transaction within context.

The nature of the LIBOR fixing has also to be fully investigated as to whether it related to the transactions of an individual bank or was it in the general context of a bank trying to influence the market at a given time into thinking that the bank was able to raise funds at a particular rate.
Many Local Authorities in the interests of stability, have borrowed and invested on a fixed basis and therefore will not have taken any exposure to changes in LIBOR directly onto their books.

As regards PFI deals, which are fixed at a given time, these have usually have been linked to medium and long term swap rates. The influence of LIBOR on the fixing of swap rates is tenuous.
It is this difficulty in assessing the exact circumstances that existed at the time deals were struck and which way the agreed LIBOR rate had been manipulated which make any calculation as to whether the Local Authority gained or lost so difficult to ascertain.