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The Takeaway From LIBOR: Break Up the Big Banks, Study Finds

A new report from the Levy Economics Institute says that the LIBOR scandal proves that banks have grown too big to regulate.

The LIBOR scandal clearly indicates that banks have grown too large to effectively regulate, a new study by Bard College's Levy Economics Institute claims. The report emphasizes the need for structural changes to the banks and rejects the idea that a failure by Bank of England officials and regulators to respond to alerts of LIBOR's manipulation are at fault for the scandal, a statement from the institute said.

The Levy Institute's Senior Scholar Jan Kregel, who authored the report, titled "The LIBOR Scandal: The Fix Is In - The Bank of England Did It," compared the scandal with JPMorgan's trading losses fiasco earlier this year. Kregel said that in both cases the response has been to point the finger at individuals involved instead of looking at any institutional changes that need to be made to the big banks. "The rotten apples have been removed without anyone noticing that it is the barrel that is the cause of the problem," Kregel wrote.

The institute's statement noted that Kregel maintains that the Bank of England and other regulators never received any information of rate-fixing during the crisis similar to that which took place before the financial crisis. Kregel argued that there is no evidence that government and regulatory officials ever condoned rate-fixing. While acknowledging certain problems with the provision and use of LIBOR itself, the scholar remarked that those concerns shouldn't divert attention from the structural changes that need to be made to the largest financial institutions.

[See Related: RBS Confirms it Sacked Staff Over Libor Rigging Scandal ]

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

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