Is LIBOR Still Being Manipulated?: Identifying Colluders with Methods of Detecting LIBOR Tampering

Abstract

We analyze the one-month U.S. Dollar London Interbank Offer Rate (LIBOR) between January 1987 and February 2015 to determine whether there are signs of manipulation based on a previously published test that has appeared in a peer reviewed economics journal and been cited in the business press and legal filings of major financial disputes. Our analysis starts with the period from February 1, 2014 to February 28, 2015, after the Intercontinental Exchange (ICE) took over the publication of LIBOR from the British Bankers’ Association (BBA) and after significant time for reforms to be implemented related to the widely publicized LIBOR fixing messages between bankers, as detailed to the British government in the Wheatley Report. We find that this previously published test still indicates the presence of LIBOR manipulation from February 2014 and into 2015. We then perform the previously published test for tracking the integrity of important market indicators, such as LIBOR, from 1987 through February 2015, and find that this test would nearly always trigger a finding of suspicious behavior, either indicating that LIBOR has been consistently manipulated since 1987 to 2015 or that the proposed test has no power to distinguish periods of LIBOR manipulation from periods of non-manipulation. We further discuss the nature of scientific evidence and how the use of non-scientific methods, if taken seriously, can lead to the misallocation of corporate, regulatory, enforcement, and potentially, in the case of such a widely use financial measure as LIBOR, global economic resources.