Finance employees are often the first to be negatively affected by financial scandals, being confronted by threats and accusations from angry customers as well as layoffs and bad working environments. Now they have to face another ordeal as regulators are investigating coordinated attempts to manipulate the basis of the Libor, the most important interbank reference rate.

Barclays Bank in the UK was the first to admit that it had tried to manipulate the Libor rate to gain financial returns. Royal Bank of Scotland soon followed. Regulators are also investigating ties between Barclays and banks such as Crédit Agricole, Deutsche Bank, HSBC and Societe Generale.

The Libor scandal comes at the worst of times. The financial crisis and its aftermath have already eroded confidence in financial markets. The financial sector suffers from a severe lack of credibility in the eyes of investors and consumers alike.

Employee involvement can help restore confidence

Efforts now have to be made to restore faith in the financial system as a whole. Here trade unions and employee influence can play a major role. Weak corporate governance is at the heart of the matter of the Libor scandal. Diversity on company boards has to be strengthened. A crucial way to achieve this is through employee representation. Strong employee involvement in corporate governance is a key factor for sound and sustainable business models.

Sound and efficient whistle blowing systems are also needed, with full protection for employees who report potential or actual breaches against the rules.

The Libor as benchmark

The Libor, London Interbank Offered Rate, rate is used a benchmark for financial products worth more than 500 trillion dollars. It is the average rate at which leading banks say they can borrow from each other, and sets the basis for such products as house loans, corporate loans, and credit card interest rates.