How to Measure the Economic Integrity of IBOR Panels? a Behavioural Approach

Abstract

IBOR manipulation imposed new benchmark regulations that force the market to enter a path of a reform of existing financial indices and creation of the new ones. The paper describes an evolution of two IBOR panels: one representing a global financial benchmark: LIBOR and the other representing a local PLN benchmark: WIBOR. The paper provides a quantitative analysis of partial quotes of IBOR panellists and suggests that economic integrity measures should be introduced for IBOR panels. The aim of the research is to define a set of tools that provide information regarding efficiency of a process of production of interest rate benchmark. The research is supplemented with a behavioural analysis of banks’ decision-making process that interferes the contribution of IBOR data. The integrity measures can help market users and financial authorities in evaluating the quality of current and past panels and identifying behavioural factors having an impact on partial quotes of contributing banks.

Keywords: financial benchmarks, money market, behavioural finance

JEL Classification: G01, G14, G15