Misconceptions of Interest Benchmark Misconduct

Asian Institute for International Financial Law Working Paper No. 28

University of Hong Kong Faculty of Law Research Paper No. 2018/002

27 Pages Posted: 11 Jan 2018 Last revised: 1 Feb 2018

Paul Lejot

The University of Hong Kong - Faculty of Law

Date Written: January 2, 2018

Abstract

Attempts to influence interest rate benchmarks such as Libor and Euribor by procuring or providing false submissions to data collators are examples of misconduct or criminal behaviour that – contrary to general belief – may have taken place for some years before becoming widely–known during the period of stress in 2007–08 that began the global financial crisis.

Subsequent enquiries, litigation, trials and regulatory settlements have included accounts of conduct that disturbed not only popular opinion but senior commercial and regulatory figures who might have been expected to require ethical behaviour of those directly concerned. Misconduct and its apparent toleration accordingly contributed to a general loss of trust in the financial sector. Penalties and settlements have been repeatedly imposed on offending banks, although judicial proceedings and regulatory enforcement actions arising from benchmark misconduct are yet to conclude.

This article considers the neglect of interest benchmark misconduct before and since it became well known; why distinct forms of misconduct have been wrongly conflated in popular and official accounts and in judicial proceedings; whether a pervasive loss of trust caused by a perception of widespread misconduct has had lasting commercial or location–specific effects; and whether reforms intended to restore external confidence by substituting recorded transaction data for subjective estimates may revive functional concerns that interest benchmarks were created to remove.

Keywords: Libor manipulation, Bank misconduct, Benchmark collusion, Trust in finance

JEL Classification: K21, K22, K23, K42, G01, G21, E43

Suggested Citation

Lejot, Paul, Misconceptions of Interest Benchmark Misconduct (January 2, 2018). Asian Institute for International Financial Law Working Paper No. 28; University of Hong Kong Faculty of Law Research Paper No. 2018/002. Available at SSRN: https://ssrn.com/abstract=3096898 or http://dx.doi.org/10.2139/ssrn.3096898

Paul Lejot (Contact Author)

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

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