4 Major Bank Scandals

 Flickr |

LIBOR Scandal

LIBOR is the London Interbank Offered Rate and is the benchmark at which interest rates across the world are based. These interest rates are what banks pay to borrow money from other banks, and in 2012, the U.S. Department of Justice underwent an investigation into allegations that banks were manipulating the LIBOR rate in order to appear healthier than it was during the years leading up to the financial collapse.

Regulators looked into Bank of America, UBS AG, Citigroup, and Barclays for fixing these rates. In 2012, UBS paid $1.5 billion in fines and Barclays Bank paid $450 million to settle.

 Flickr |

HSBC Laundering Scandal

Late last year, HSBC had to pay the biggest penalty ever imposed on a bank in America, settling for $1.9 million in a money-laundering probe.

The bank was accused of directing its funds to drug cartels and laundering money to Iran and Sudan, among others. U.S. prosecutors debated for months on whether to fine HSBC or to press criminal charges, but decided to ultimately fine them, as “a money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank,” writes the New York Times. “Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its quarter to operate in the United States.”

 Flickr |

UBS Trader Scandal

In 2011, Swiss bank UBS lost over $2 billion due to a trader who had gone rogue and made unauthorized trades. The trader, Kweku Adoboli, had apparently manipulated a loophole in European trades, in which “a party [can] receive payment for a trade before the seller has confirmed the transaction to the buyer,” writes CNN.

Adoboli told UBS of the losses and was taken in by authorities in 2011 and was sentenced to seven years in prison at the end of last year. The then-CEO of UBS resigned after the incident, assuming responsibility for the unauthorized trading.


Chase’s $2 Billion Loss

In May of last year, Chase shocked the banking world when it announced that it had lost more than $2 billion through “errors, sloppiness and bad judgment.” Chase, with a reputation of stability even through the 2008 financial collapse, had mostly avoided rough waters through confident management from Jamie Dimon.

For Dimon, “It is a rare blow... After successfully steering his bank through the market turmoil of 2008 and the recession, he is perhaps the most influential bank executive in the country -- and a vocal critic of the efforts to write rules under the Dodd-Frank regulatory overhaul,” writes the New York Times.