The Canary Wharf headquarters of Barclays Bank in London, England.
The Canary Wharf headquarters of Barclays Bank in London, England. - 
Listen To The Story

David Brancaccio: First, it was the chairman of the board said he was leaving his post; now it's the big man, Barclays CEO Bob Diamond who's stepping down effective immediately. The London-based financial services giant is accused of rigging the level of a key interest rate along with nearly two dozen other banks.

Joining me live from London is Marketplace's Stephen Beard. Stephen good morning.

Stephen Beard: Hello David.

Brancaccio: So we're clear on this, what is the allegation at the center of this Barclays scandal?

Beard: OK. Well, this is a curious little system that's been operating here in London, for many years, to produce a key benchmark interest rate -- the rate at which banks lend to each other. What happens is a company goes separately to 18 major international banks in London and ask them: How much do you pay to borrow from other banks today? The company then takes all those reported interest rates, and uses them to work out the key, so-called LIBOR rate, and which they then use as a basis for trillions of dollars worth of loans and mortgages around the world.

What Barclays has been fined for -- and what Diamond is resigned over -- is because it was found to have lied about its borrowing costs and profited, both from pushing up and pulling down, the LIBOR rate.

Brancaccio: Well lying is one thing, but what about when you hear words like "market manipulation" or "collusion," one assumes the activity itself is against the law...

Beard: This is the extraordinary thing: British prosecutors are investigating whether or not it is a crime. Because it's such an amateur, voluntary, ramshackle operation, there's some doubt about whether rigging it was a crime -- even though LIBOR plays a crucial role in the global financial system.

Arlene McCarthy is a member of the European parliament, and she's pressing for this kind of interest rate rigging to be made illegal across Europe. She believes it would be illegal in the United States.

Arlene McCarthy: The key issue here is, as we've seen in the U.S., we can have a criminal investigation and that they can go to prison -- custodial sentences -- because frankly, ordinary people go to prison for much less.

But European law will have to be changed. Just as some banks were too big to bail, under current law, it seems some British bankers are too difficult to jail.

Brancaccio: Marketplace's Stephen Beard in London, thank you very much.

Beard: OK David.