UK govt cannot confirm money from LIBOR fund used as intended

Maria Nikolova

The LIBOR fund comprises massive £973 million but the National Audit Office report shows the UK government cannot confirm how the money was spent.


The London Interbank Offered Rate (Libor) continues to be on top of the agenda for the UK financial services sector, as well as for the public, given that the money from the Libor fund should go for good causes demonstrating best values.

Today, the UK National Audit Office (NAO) published a report entitled “Investigation into the management of the Libor Fund”. The fund was set up after an international investigation beginning in 2012 into Libor revealed that several banks in the United States and the European Union, including the UK, had manipulated Libor for profit. UK regulators fined the banks a total of £688 million. In 2012, the then Chancellor pledged that “the multi-million pound fines paid by banks and others who break the rules will go to the benefit of the public and not to other banks”.

In 2013, an investigation was launched into allegations that dealers were manipulating exchange rates. Six banks were fined £6.3 billion in 2015. This included fines of £1.5 billion for Barclays by five international regulators, of which £284 million was issued by the UK’s Financial Conduct Authority. In June 2015 the Chancellor added this £284 million fine for manipulation of foreign exchange markets (Forex) to the Libor Fund. This brought the total available in the Fund to £973 million.

Due to questions raised by Parliament and the media about the transparency of how the money from the fines is being distributed, NAO launched an investigation to explain how the government has distributed the money.

The NAO reports shows that up to September 2017 the government had committed £933 million of the £973 million. Here is a breakdown of the funds distribution:

  • HM Treasury – £467 million;
  • Ministry of Defence (MoD) – £266 million;
  • Department for Education – £200 million.

The remaining £40 million of the fund is held by HM Treasury but has not yet been committed to any particular scheme.

The report makes some critical remarks. For instance, it is not clear whether the Department for Education used the Libor fund money to deliver apprenticeships, as promised. DfE has not pursued a specific policy to deliver apprenticeships to previously unemployed 22–24 year olds and it cannot demonstrate whether 50,000 new apprenticeships for this group have been provided. It is not possible to distinguish the impact of the £200 million Libor fund spending from the performance of the overall apprenticeship program.

Overall, the UK Government cannot yet confirm that all the money has been used as intended.

Moreover, the report notes the lack of clarity with respect to money distribution. The initial pledge that the money would support Armed Forces charities and good causes was later expanded in October 2014 to include “Armed Forces and emergency services charities and other related good causes that represent those that demonstrate the very best of values”.

There is no government directive that provides more detail about how the money is to be spent or what constituted ‘the best values’. Hence, the money is not ring-fenced and the government has been able to use the money for pretty much any government spending.

Read this next

Digital Assets

Silvergate dismisses speculation of trouble, says BlockFi exposure is minimal

Crypto-friendly bank Silvergate Capital claimed on a Tuesday blog post that it had minimal exposure to crypto lender BlockFi, which filed for chapter 11 bankruptcy protection this week.

Retail FX

Fidelity launches crypto trading for retail investors

Fidelity Investments, one of the largest brokerages in the world, has officially rolled out a commission-free crypto trading product for retail investors, starting with zero-fee trading for Bitcoin and Ethereum.

Digital Assets

ECB head calls for tougher crypto regulation after FTX collapse

President of the European Central Bank, Christine Lagarde, has called on lawmakers to start working on fresh crypto regulations to protect the financial system after the collapse of the FTX exchange.

Retail FX

CySEC updates rules for regulated brokers’ cross border activity

As CySEC’s attitude of adopting more stringent licensing guidelines and operating regulations becomes ever clearer, certain aspects of the rules and operations start to come into sharper focus.

Market News

Outlook for Gold: Can the Precious Metal Regain Power?

Gold set an all-time high at $2070 on March 08, 2022, when the price skyrocketed amid investors’ worries about the military conflict in Eastern Europe.

Crypto Insider

2022 Islamic Finance recap: as the space continues to evolve, blockchain stands to play a big part

Despite the global economy being ravaged by turmoil induced by the Covid-19 pandemic over the last couple of years, the Islamic finance industry has emerged relatively unscathed

Crypto Insider

Decentralized Exchanges and Pooled Trading Platform Applications

Decentralized exchanges are one-way blockchain companies take back the power of value creation.

Crypto Insider

How to maximize the safety of your digital tokens?

Digitalization is the future of the investment world. These are the most preferred and growing investments in the world.

Institutional FX, Interviews

FIA EXPO 2022: Interview with Trading Technologies

The derivatives trading industry has gathered in Chicago to attend the FIA EXPO 2022 on 14-15 November.