NRI economist Shriti Vadera drawn into UK interest rate scandal
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Shriti Vadera, the Indian-origin economist who worked closely with former prime minister Gordon Brown, has come under focus in the latest scandal that has hit British banks, forcing the top leadership of Barclays to resign for rigging interest rates.
Barclays chairman Marcus Agius and chief executive Bob Diamond have resigned after regulators in the UK and US slapped a $453 million penalty on the bank.
The penalty was on charges of trying to rig Libor and Euribor, the key interest rates at which banks lend to each other and which is the basis for trillions of pounds of financial transactions.
Vadera, 50, was one of Labour Party’s chief economic advisors, and co-wrote a document titled ‘Reducing Libor’ in November 2008.
The document has come under focus as the current scandal prompted an inquiry announced by Prime Minister David Cameron on Tuesday.
Vaderas document, written at the height of the credit crunch, reportedly mentions that bringing down Libor would be "a major contribution to the stability of the banking system and to the health of the economy”, and concludes: "Getting down Libor is desirable".
Noting that there had been concerns in the government about Libor figures, Vadera insisted that was 'very different' to issues of alleged market manipulation now.
Traders at Barclays rigged the Libor rates over several years, trying to raise them for profit and then, during the financial crisis, lowering them to hide the level to which Barclays was under financial stress.
The Serious Fraud Office is considering whether to bring criminal charges against individuals in the bank. In its notice on June 27, regulator Financial Services Authority (FSA) said Barclays had breached three of the FSAs principles for businesses through misconduct relating to its submission of rates which formed part of the Libor and Euribor setting processes.
"There was a risk that Barclays misconduct would threaten the integrity of those benchmark reference rates", it said.