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The financial world is absorbing yet another shock. A major British bank has admitted to trying to manipulate a key global interest rate. The bank, Barclays, has already paid a $453 million fine and seen its chairman resign, and many think this is just the beginning. Today, British Prime Minister David Cameron announced a wide-ranging inquiry into his country's banking sector. We're joined now by Adam Davidson of our Planet Money team. And, Adam, first tell us what Barclays is believed to have done, and what they've admitted doing?

ADAM DAVIDSON, BYLINE: What they've pretty much admitted to doing is sending lies to the British Bankers' Association, which is the organization that sets sort of the benchmark interest rate for a huge portion of the trades of the loans and interest rate swaps and derivatives that are traded around the world. This is called LIBOR, and it's the core interest rate for hundreds of trillions of dollars of transactions around the world. And this rate is set in England by a handpicked set of banks calling up every morning at 11 a.m. and saying here's what we are borrowing money at, here's the rate we're paying.

And then they average that number, and that is the interest rate that people all over the world use to figure out how much should we charge for loans or pay for loans and to find out that Barclays may have been lying and manipulating that rate for their own profit calls into question huge swaths of the financial system. It's really big.

SIEGEL: Lying by saying that the rates that they were being charged were higher than they in fact were?

DAVIDSON: Some cases higher, some cases lower, it depends on what kind of trades they were doing. We have all of this now email evidence of Barclays' traders talking with each other, talking with their customers about manipulating this rate. And it's just shocking to read just the casual offhanded way they talk about lying to the British Bankers' Association so that they could make thousands of dollars in profit. But the impact could be billions of dollars around the world. If you change this core fundamental rate, it's conceivable that nearly every loan in the world is a bit more expensive than it should be.

SIEGEL: But, Adam, I read up about the LIBORs. It's London interbank offered rate, and the way it's arrived at, and what I read is that for each of 10 currencies, there's a panel of banks numbering either eight or 12 or 16 or 20 banks, in any case, it's divisible by four. And if it's, say, a 16-bank panel, you take the four highest and discard them. You take the four lowest, you discard them. And then you make an average of the middle 50 percent. It seems like a method designed to make it extremely difficult for any single bank to influence the outcome of that averaging.

DAVIDSON: Yes. And if Barclays is the only one that's sought to manipulate this rate, it's possible it had very little to no effect on the overall global financial industry. But what we know is well over a dozen other banks are being investigated by U.S. and U.K. authorities. And if it turns out that this number has been the product of a coordinated or even an uncoordinated series of self-serving lies by over a dozen banks, then it really calls into question the entire way that our global financial architecture works.

SIEGEL: Can Barclays or if other banks are to be investigated can another bank say there's some judgment call involved here, it's more than just adding up a column of figures, or is it actually so cut and dry that you can say that's a lie?

DAVIDSON: The way it works is you are supposed to use judgment. It's not supposed to be an average of what you pay that day. It's supposed to be your discretion, your view. I think what's really damning for Barclays is all this email traffic that just shows traders openly agreeing to adjust the number to please clients or to improve their own commission. And this strikes me as huge and really important for all of us to pay attention to because what it means is that the banks really don't seem to be able to self-police quite as much as they were trusted to do. It's a big, big moment in the history of banking and banking regulation.

SIEGEL: Thank you, Adam.

DAVIDSON: Thank you.

SIEGEL: That's Adam Davidson of our Planet Money team, speaking to us from New York.

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