Banks considering group settlement for Libor to reduce backlash from confessing to lying for their own benefit

Reuters reports that the banks involved in the Libor scandal are considering a group settlement in the hope that this will reduce the backlash from their admitting they lied for their own benefit.

Actually, the only step that banks could take that would reduce the backlash is if they voluntarily offered to provide ultra transparency and disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details.

It is only by accepting the simple fact that they need to allow sunlight in to disinfect their entire operation that they can hope to start to rebuild any trust.  Even with ultra transparency, rebuilding trust will take years.

What the Libor scandal has done is show every market participant that bankers are not to be trusted as advisors or counter-parties and that anything bankers say or do is solely for their benefit even if the statement or action involves lying.

A group of banks being investigated in an interest-rate rigging scandal are looking to pursue a group settlement with regulators rather than face a Barclays-style backlash by going it alone, people familiar with the banks' thinking said. 

Such discussions are preliminary, and it is unclear if regulators will enter these talks, aimed at resolving allegations that banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins hundreds of trillions of dollars in contracts.... 

The sources told Reuters that none of the banks involved now want to be second in line for fear that they will get similarly hostile treatment from politicians and the public....

I can understand why no banker wants to be second.

The Bank of England set the standard for clearing out the executive suite with Barclays.  To meet the standard, every bank that settles needs to dismiss the chairman of its board, its CEO and his top lieutenant without a golden parachute.

Nobody wants to lose his job and the big bonuses that come with it.

A group agreement would appeal to financial watchdogs because they would be able to announce a headline-grabbing figure, showing that they were dealing firmly with the banking industry's misdemeanors, a banker told Reuters on condition of anonymity.

The only figure that would be worthwhile of a headline would be a figure that the banks could not afford to pay.  Remember, we are talking manipulation of Libor over a multi-year period.  The profits the banks could have earned and the bonuses paid as a result are very large numbers; think billions!

Now, if 100% of the settlement figure was paid for by clawing back banker bonuses across the organization for say the last 5+ years, then everyone would feel differently.  But that is not going to happen.

Earlier this year, five top U.S. banks negotiated a $25 billion settlement with the U.S. Justice Department and other federal and state agencies to resolve allegations of mortgage services abuses....

This settlement was so ridiculously low that it served only to further undermine the little credibility that the US Justice Department and other federal and state agencies had.

For banks, it was a get out of jail free card for pocket change.

While Barclays received a 30 percent "discount" on the fines for cooperating fully with authorities, it sustained far more serious damage with the subsequent loss of its top management and a public pillorying at the hands of politicians....

Confirmation that the regulators are out of their depth when it comes to fining a bank.  Let see, how does a $500 million fine change a bank's behavior when the benefit it received was measured in the billions?