This doesn\’t sound quite right to me.
What that meant was that even though Libor may have been, for example 2pc, the real Libor rate the bank was paying was more like 5pc or 6pc. So in fact, we needed to be lending money at Libor plus 3pc or 4pc just to break even. That is what we were telling clients.
I agree that Libor might have been around that, yes. But it\’s also true that there wasn\’t really a Libor market at that time. Banks pretty much were not lending to each other.
What was happening was that excess would be deposited at the Bank of England and then required amounts were being borrowed from the BoE. Effectively, the BoE was insuring the counter party risk for everyone.
And the actual rates at which banks were borrowing was a great deal lower than the unmanipulated Libor.
Sure, I could be completely wrong here, wouldn\’t be the first time it has happened. But I\’m not convinced by this story, not at all.