The LIBOR scandal of Britain.

First, what is LIBOR? A: It is the London Interbank Offered Rate. The rate banks pay for borrowing money.

What is the importance of LIBOR? A: A lot of consumer credit is fixed by LIBOR.

The nature of LIBOR. A: There are different rates depending on how long it takes to repay the loan.

What is the LIBOR scandal? A: A lot of banks have been allowed to set up consumer units and investment units. The investment units write derivatives in LIBOR rate. They call it insurance, but essentially these derivatives are betting slips. The banks manipulated the LIBOR rate in order to profit from the derivatives.

What is being offered to fix the problem? A: A Commission suggested the separation of the consumer and investment branches.

Will that solve the problem? A: NO. The problem arises from there being derivatives. As long as there are derivatives, the rates will be manipulated. Since, the banks can set the rate, individuals in the banks can inform investors (bettors) on what the rates will be. The way to stop the illegal activity is by NOT allowing derivatives.