FSA to Reform Libor Responsibilities for the BBA

Head of the UK’s financial regulator, Mr Martin Wheatley, has will publish a report that suggests reforms to Libor this week. This includes the role of the British Banker’s Association (BBA) who originally collated the data used by Libor.

In the wake of the Libor rigging scandal, in which Barclays were charged and several other banks are under investigation for purposefully altering estimates to control the inter-bank rate, the FSA has decided to review how Libor is run and suggest any reforms that they feel necessary.

It is expected that one of these reforms will be the change in responsibility for the BBA to collate and publish the data that affects the inter-bank rate. The BBA released a statement saying that: "If Mr Wheatley's recommendations include a change of responsibility for Libor, the BBA will support that."

In the current working of Libor, banks submit estimated rates at which they would loan each other money, in particular the percentage of interest on dollars over a 3-month period. The estimates are then used to calculate the standard rate for inter-bank exchanges.

This is a reflection on the financial health of different banks, the benchmark for interest rates on mortgages, loans and other lending.

It was discovered that, for several years, senior Barclays employees were purposefully driving down the Libor rates, which resulted in large losses for savers and investors. Other banks are being investigated currently on the same charges of manipulation.

This scandal compounded several months of other humiliations for the banking industry, including the miss-selling of payment protection insurance and the miss-selling of specialist insurance (interest rate swaps) for small businesses.

Just what the reform ideas will be remains to be seen until the report is published (expected on Friday) and how quickly it can be implemented may affect how well the reform is received. It is speculated that Libor rates will be calculated based on actual market information, instead of bank estimates. One thing is for sure, these recent scandals have sunk trust in the banking industry even further and something has to be done about it.

FTSE 100 Sees 6 Month High Thanks to US Federal Reserve

the previous close line of 5820 can be seen near the bottom of the graph
The US Federal Reserve announced that it was pledging $40billion a month into a flagging US economy, until it saw sustained job market growth. The news comes as a great relief to the UK market as it struggles to deal with declining and unstable European financial systems. A growing and strong US market would give the UK a solid economy with which to trade, bolstering confidence in the UK stock market.

As of 11:13am the FTSE100 was at 5910.41, a 90.49 or 1.6% growth. While it ducked a little from an earlier high of 5911.70, where the index hit its strongest posting in 6 months, the growth is incredibly encouraging during a nervous time for most economies. This is a large step towards the FTSE’s aim of hitting 6000 points, a psychological barrier that, once broken, will provide a huge measure of confidence in the UK market and hopefully stimulate the economy even further.

Experts have warned against being too optimistic about the rise, indicating that while it is a positive move for the market, there are chances for people to run too far ahead and see another drastic collapse. Erring on the side of caution seems to be the way forward.

Dag Muller, technical strategist at SEB (Skandinaviska Enskilda Banken/Scandinavian Private Bank) said of the growth, “If you look at the move from the June lows, you can draw some tentative trend channel lines and the upper end of that trend channel coincides fairly well with that yearly high. So ... as long as we don't get any message from the market that it has run too far too fast, I think you should aim at 6,000-plus in this move in the FTSE ... within next week."

A 6000point valuation of the FTSE 100 has not been reached in over a year. The FTSE 250 also saw a boost, with 271.85 rise as of 13:30.

The Importance of Defining Your Company's Purpose

Many companies have mission statements, slogans and promises that tell their consumers what the company offers, whether it’s low prices, a reliable source or expert services. However, a promise isn’t worth much unless you let people know why your company offers that pledge.

The purpose behind a company essentially asks the age old question “why are we here?” and it’s important in business. You have to know why you’re in the marketplace, what about your company is vital to your customers’ lives and why they should trust in your promise.

It also helps employees and associates throughout the business to know why they work for you, what their work is going towards and how they should conduct themselves. It defines their very work ethic.

An example is Wal-Mart, which promises reduced prices on a range of goods. It recently went on to ask why it guarantees that, and it came up with the answer ‘to provide better lives for families’. This meant that customers trusted Wal-Mart motives more and it helped employees to know that the food and other products they were helping to sell would ultimately benefit a family by allowing them to the spend money they saved shopping on other goods or services.

Defining why your company exists can mean that you can easily find a way to carve a niche in your marketplace. It gives you a sense of purpose and a drive to move forward, an important thing in the current climate, and can be a rallying cry for your investors. Many companies offer the same service or product, but how and why they operate can vary and this can be how to make yourself get noticed and, ultimately, chosen.

Purpose gives companies something to strive for and fulfil a much greater psychological bond with customers than empty promises. Knowing who you are is vital to standing out in a crowded marketplace.

How will be people know your purpose? Through purpose-driven marketing. You have to let people know who you are, what you offer and why you offer it. Those three combined all add up to why they should choose you over a competitor and will increase brand connectivity with your consumer base. This works best by using online and social marketing, where people can interact and keep up-to-date with how your company fulfils its purpose.

So take a long, hard look inside your company and figure out just why you are here. It’s a much easier philosophical question than trying to figure out why we’re here as a whole.