Barclays Tanzania clears its customers’ worries on rate fixing scandal

A SENIOR official with the Barclays Tanzania office has said that, the bank’s money lenders in Tanzania will not be affected by the recent rate fixing scandal which the bank has admitted to have manipulated at its London based headquarter in UK. The call by the Barclays bank has echoed amid fear and horror amounted by the bank lenders in Tanzania who have been shocked when news about the scandal broke out in early July this year. The Bank’s Acting Head of Corporate Affairs, Ms. Tunu Kavishe has assured the public when she told this blog in an exclusive interview in Dar es Salaam on Wednesday this week that, the country’s borrowers with the bank are not affected by this uncovered interest rate fixing scam. Elaborating further on the issue, she said that, the issue was primarily concerned with the customers based in London only and added that, there is no any application of this in other sister bank offices world widely Tanzania included. Tanzania has a better chance to inquire reasons behind to see how it has suffered under what is likely to be the cause of problem of London Interbank Offered Rate (LIBOR). However she noted that, Barclays Bank Tanzania is strong and continues to focus on serving its customers diligently.  “Our customers should continue to be reassured that our focus will remain on serving them and that business continues as usual”. She said adding that the bank has given the same reassurance to the regulators the Central Bank of Tanzania. However, she said that, the bank’s customers should not worry about the scandal as there is no damage envisaged to them, and added that Barclays bank continues to be well managed and customer’s money is safe.  She has also assured the people that there are no risks locally since Barclays bank operates as an independent entity from its UK headquarters and therefore there is no much to worry about. However, she noted that, the bank has a clearly defined strategy and clear direction and we will continue to serve our customers and clients effectively and efficiently.  The Barclays bank headquarter office in London was recently accused of falsifying LIBOR which it had admitted to have manipulated. Under the scam, the bank is accused of providing information about artificially low rates to encourage borrowing and offers central banks and lenders worldwide an overview of risks in the market and the rates at which money may be lent. LIBOR rates are an international benchmark and we as well as other banks may base our foreign currency lending on this benchmark. The local Interbank Foreign Exchange markets don't use this benchmark for FX trading. Barclays’ management in its London based headquarters came under fire two weeks ago when the bank was fined $453 million by U.S. and British regulators for submitting false reports on interbank borrowing rates between 2005 and 2009.  

The Managing Director of the Barclays Bank Tanzania office, Mr. Maina Kihara (standing left) holding a sports sponsoring placard for the bank in one of the sports promotional activities in Dar es Salaam. Such sports occassions are sponsored by the bank as part of their corporate resposibilities activities.

Much of that activity originated from traders in Barclays Capital, the investment banking division which the Chief Executive Robert Diamond who resigned amid the scandal headed before he became the CEO. Commenting on the issue, the Bank of Tanzania Governor Professor Benno Ndulu was recently quoted by the media as saying that, the possibility of such a financial scam locally would cause a negative impact. But for the Barclays, it had tools to curb such problems and there was no way Tanzania to be affected because the local commercial banking sector operates under different market conditions. “It is not possible here for a commercial bank to collude in fixing interbank interest rates against the regulations because in Tanzania they are normally set through guided negotiations, while in Europe then rate is set by a competitive process” he said. Barclays customers here and those of other multinational banks have no reason to worry because under Tanzania law, the financial institutions operates as separate entities from the parent companies. Interviewed Dar based economist Sylvester Mawala says that, it is impossible for the banks to manipulate inter-banking lending rates because in Tanzania there is a big gap between lending and deposit rates contrary to Europe where there is small margin between lending and deposit rates. According to him, the Barclays scandal will not in any way affect the country’s currency exchange rate or affect local inter-banking rates because these are benchmarked on the basis of treasury bills.