Cameron said while the bank had tried to impose ethical values on its traders, it could not control their behaviour.
"You cannot impose moral standards on those that do not wish to be moral," he said,Please re-read the highlighted text especially if you are the chief executive of Barclays and you wonder why no-one believes that your rhetoric will make one iota of difference in your bank's culture.
Regular readers know that the FDR Framework is built on the idea that you cannot impose moral standards on those that do not wish to be moral. You can on the other hand use transparency to limit what these individuals can get away with.
Mr. Cameron went on to explain why opacity is attractive to those that do not wish to be moral,
adding Libor manipulation had not been seen as a potential danger for banks.
"It just did not occur to anyone that this was a rate that could be fiddled."Excuse me, but Libor was designed so that it could be fiddled without the market knowing.
From its inception, Libor and its related benchmark interest rates (Tibor and Euribor) were not based on actual transactions that the market could verify but rather constructed in as opaque a manner as possible. This meant the rates could be fiddled.
As your humble blogger has repeatedly said, had banks been required to provide ultra transparency and disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details, Libor could not have been manipulated.
It couldn't have been manipulated because it would have been based on all the actual transactions in the unsecured interbank lending market.
Bottom line: you cannot impose moral standards on those who do not wish to be moral, but you can use transparency to limit their ability to act in an immoral manner.
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