LIBOR: Origins, Economics, Crisis, Scandal and Reform

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable-rate mortgage and student loans. LIBOR's volatile behavior during the financial crisis provoked questions surrounding its credibility. Ongoing regulatory investigations have uncovered misconduct by a number of financial institutions. Policymakers across the globe now face the task of reforming LIBOR in the aftermath of the scandal and crisis.

Benchmarks in Search Markets

“…This finding is consistent with the insight ofAsriyan, Fuchs, and Green (2015) (in a very different model) that welfare can be non-monotone in the degree of transparency.6 SeeHou and Skeie (2013).…”

Breakdown of Covered Interest Parity: Mystery or Myth?

“…Admittedly, the Libor-OIS spread is not a perfect measure of the risks for the CCBS market. First, the Libor scandal is well known and therefore its reliability as a measure of the cost of funding accessible by banks in general seems questionable (Hou & Skeie, 2014). Second, there is a considerable difference in the composition between the Libor and CCBS markets.…”

Libor benchmark: practice, crime and reforms

“…Suspicious patterns of data were, nevertheless, flashed out in various research efforts (Brousseau et al, 2009;Abrantes-Metz et al, 2008), but other findings suggest the lack of concrete evidence (Snider and Youle, 2012;Ellis, 2011). It was from investigative probes of internal communications that the intention to misreport was uncovered (Hou and Skeie, 2014). These revelations showed bank traders seeking favours from those responsible for Libor survey submissions to enhance their profits, while on other occasions, there appeared to be management nods to keep Libor submissions lower to safeguard the institution's financial status (Vasudevan, 2013;Gensler, 2012).…”