Libor scandal

The Libor scandal was a series of fraudulent actions connected to the Libor (London Interbank Offered Rate). It affected the Interbank foreign exchange market, the trading of different banks with each other.
The Libor is an average interest rate. It is calculated when major banks in London submit their interest rates. It was discovered that banks falsely changed the interest rates before submitting them, so that they could profit from the trades. Sometimes, this also made them look more creditworthy than they really were. There is a market of about 350 trillion dollars in derivatives, which is connected to Libor. British Bankers' Association (BBA) manages the Libor. 
The banks are supposed to submit the actual interest rates they are paying, or would expect to pay, for borrowing from other banks. The Libor is supposed to be the total assessment of the health of the financial system because if the banks being polled feel confident about the state of things, they report a low number and if the member banks feel a low degree of confidence in the financial system, they report a higher interest rate number. In June 2012, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the rate submissions, leading to the scandal.
Because Libor is used in United States derivatives markets, an attempt to manipulate Libor is an attempt to manipulate United States derivatives markets, and thus a violation of American law. Since mortgages, student loans, financial derivatives, and other financial products often rely on Libor as a reference rate, the manipulation of submissions used to calculate those rates can have significant negative effects on consumers and financial markets worldwide.
On 27 July 2012, the "Financial Times" published an article by a former trader. The article said that Libor manipulation had been common since at least 1991. Further reports on this have since come from the BBC and Reuters. On 28 November 2012, the Finance Committee of the Bundestag held a hearing to learn more about the issue.
The British Bankers’ Association said on 25 September 2012 that it would transfer oversight of Libor to United Kingdom (UK) regulators, as predicted by bank analysts, proposed by Financial Services Authority Managing Director Martin Wheatley's independent review recommendations. Wheatley's review recommended that banks submitting rates to Libor must base them on actual inter-bank deposit market transactions and keep records of those transactions, that individual banks' LIBOR submissions be published after three months, and recommended criminal sanctions specifically for manipulation of benchmark interest rates. Financial institution customers may experience higher and more volatile borrowing and hedging costs after implementation of the recommended reforms. The UK government agreed to accept all of the Wheatley Review's recommendations and press for legislation implementing them.
Significant reforms, in line with the Wheatley Review, came into effect in 2013 and a new administrator will take over in early 2014. The UK controls Libor through laws made in the UK Parliament. In particular, the Financial Services Act 2012 brings Libor under UK regulatory oversight and creates a criminal offence for knowingly or deliberately making false or misleading statements relating to benchmark-setting.