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The “London InterBank Offered Rate” (LIBOR) is one of the most important short-term interest rates with trillions of US dollar in financial products tied to it. Due to recent allegations of manipulation of the LIBOR, this paper aims to investigate the integrity of this rate.

The paper analyzes the LIBOR and its rate fixing process using different screens to detect potential manipulative behavior on the macro and micro level. As main frameworks, an interest rate parity approach and the construction of a theoretical LIBOR using Credit Default Swap (CDSs) are applied. A simulation on the potential impact from one through four banks manipulating the LIBOR is performed as well.

The results on the macro level show that the LIBOR deviates heavily from other short-term interest rates from mid-2007 onwards, reaching its peak in September 2008 with the collapse of Lehman Brothers. On the micro level, the individual submissions of the panel banks are investigated, finding inconsistencies for Barclays and HSBC. Furthermore, a simulation on the influence from potential manipulation under the current calculation method reveals substantial effects on the LIBOR fixing. Even one bank trying to manipulate the fixing has a strong influence on the rate setting.

This paper contributes to the academic landscape in that it investigates the LIBOR rate setting process and if irregular behavior can be detected, given the screens used. Due to the findings of conspicuous behavior in the fixing during certain periods, the integrity of the rate setting process is more than questionable.

The purpose of this paper is to trace how and why the market-designed Libor benchmark turned bad, thereby necessitating a regulatory response.

The study relies on primary and secondary data in the public domain and complemented by a single-case study.

The study demonstrates how and why Libor benchmark rigging led to reforms in the UK and elsewhere.

The study relying mainly on the secondary data analysis needs to be enhanced by further empirical-based studies.

Insights generated by the study suggest why it might not be worthwhile for market participants to game the system.

Libor benchmark affects the financial system widely with varying significance to the wider public. With better regulatory oversight, its negative impact is expected to be mitigated considerably.

The seriousness with which the enforcement agency and judiciary now treat financial crime weakens the earlier public perception that white-collar crime is enforced differently.

The London Interbank Offered Rate (LIBOR) is considered to be the most important interest rate in finance upon which trillions in financial contracts are decided. In 2008, it was revealed that the LIBOR traders were rigging the interest rates. Yet, there is an unresolved question that regulators and banking officials did not address in their quest to seek answers to the fraud: Were the banks under financial strain when they underreported their LIBOR rates? To answer this question, the article posits that the pressure to meet market expectations led the banks to experience financial strain. Data were gathered from 2004 to 2008 on the banks that were involved in the fraud (fraud banks) and matched with a control group of non-fraud banks. The results from a logistic regression model found sufficient statistical evidence to support the claim that fraud will be greater in banks characterized by a higher level of organizational complexity. Variables such as percent of outside directors, board members on the audit committee, and number of employees were all found to be statistically significant. These variables may offer key insights into detecting and preventing frauds in banks.

The aim of this paper is to discuss the impact of regulatory-driven changes to the collateral management landscape, indicating operational and technological challenges faced by global investment banks while complying with the new regulatory framework. As it transpires, collateral management strategies need to be revised to find optimal solutions for the regulatory-shaped landscape. Furthermore, set against the regulatory background, this paper attempts to provide some insights into the future risks and shocks to collateral management.

This paper recognizes the dearth of up-to-date studies on current issues with collateral management and overnight indexed swap (OIS) discounting. Therefore, to introduce new theoretical avenues, this paper is based on an exploratory, qualitative approach to analyse the regulatory-driven collateral management.

The increased use of collateral, with a sharp focus on its quality, liquidity and eligibility for central clearing, requires a new approach to collateral management and discounting methods. At this point, banks (especially those with agency businesses) should develop an enterprise-wide view of collateral by having a central data repository, which allows access to information about the transactions conducted with all counterparties.

Analysing the regulatory-driven (Basel III; Dodd-Frank; EMIR) changes to collateral management, this paper adopts banks’ perspectives on the new regulations in collateral management. The paper contributes to the widespread, albeit complex, discussion on how banks adapt to the rapidly changing environment in collateral management and risk operations.

The framework of this paper is financial mathematics and, more specifically, the control of data fraud and manipulation with their subsequent economic effects, namely, in financial markets. The purpose of this paper is to calculate the global loss or gain, which supposes, for the borrower, a change of the interest rate while the contracted loan is in force or, in another case, the loan has finished.

The methodology used in this work has been, in the first place, a review of the existing literature on the topic of manipulability and abusiveness of the loan interest rates applied by banks; in the second place, the introduction of a mathematical-financial analysis to calculate the interests paid in excess; and, finally, the compilation of several sentences issued on the application of the so-called mortgage loan reference index (MLRI) to mortgage loans in Spain.

There are three main contributions in this paper. First, the calculation of the interests paid in excess in the amortization of mortgage loans referenced to an overvalued interest rate. Second, an empirical application shows the amount to be refunded to a Spanish consumer when amortizing his/her mortgage loan referenced to the MLRI instead of the Euro InterBank Offered Rate (EURIBOR). Third, consideration has been made to the effects and the possible solutions to the legal problems arising from this type of contract.

This research is a useful tool capable of implementing the financial calculation needed to find out overpaid interests in mortgage loans and to execute the sentences dealing with this topic. However, a limitation of this study is the lack of enough sentences on mortgage loans referenced to the MLRI to get some additional information about the number of borrowers affected by these legal sentences and the amount refunded by the financial institutions.

To the best of the authors’ knowledge, this is the first time that deviations in the payment of interests have been calculated when amortizing a mortgage.

This paper aims to identify social psychological root causes of misconduct by traders and offers practical guidelines to prevent misconduct.

The authors use insights on social psychological mechanisms to examine current business practices observed in the context of supervisory activities. Case examples were collected at Dutch and European banks, including major institutions. This is an opinion peace that interprets regulator experiences from a social psychological perspective.

The authors characterize standard responses to misconduct in trading as reactive and elucidate why this “bad apples” perspective is insufficiently effective. As an alternative, the authors address the social psychological root causes of misconduct within trading teams. The “corrupting barrels” model identifies ineffective error approaches, outcome inequality and dysfunctional moral climates as contextual root causes in team dynamics. The model uses current insights from empirical research in psychology to do so.

This paper specifies practical guidelines that help prevent future misconduct among traders.

Addressing the contextual root causes of misconduct at the team level will help banks and financial supervisors to improve their effectiveness in preventing misconduct. In the context of standard “bad apples” approaches, the “corrupting barrels” model offers an original perspective.

The aim of this research is to answer whether or not wholesale interest rates, such as the London Interbank Offered Rate (LIBOR), can be used as an effective policy instrument to influence construction output. Developers and contractors borrow to finance construction and are charged retail interest rates, determined by the lending bank. The study investigated the relationship between LIBOR and construction industry output.

The study identified two time series, LIBOR and annual construction output and a number of regressions were run using the first differences to observe whether a change in LIBOR alone had a significant influence on construction output lagged by one to four years.

No significant relationship was found between changes in LIBOR and the annual change in construction output, regardless of the number of years lagged.

The policy implication of this research shows that control of demand for construction by government using wholesale interest rates is unlikely to succeed. Banks' lending to developers depends on other factors, such as retail interest rates, risk management and expectations.

The value of this research is that it supports the view that government policy needs to focus on stimulating construction demand, using real projects rather than monetary policies, such as interest rate manipulation.

The meaning of scandals like “Liborgate” is not given beforehand; it is constructed in the course of framing contests. The purpose of this paper is to provide a nuanced framework for understanding such framing contests by re-conceptualizing them as rhetorical struggles.

A conceptual framework that combines modern framing theory, and classical stasis theory is applied to the rhetorical struggles over the meaning of “Liborgate.”

While rhetorical struggles over “Liborgate” overtly center on the issue of who is to blame, an analysis of the argumentative relations between competing frames leads to the conclusion that this political “blame game” is related to struggles over how to define the scandal, how to conceptualize its causes, and policy recommendations. Banks may have lost the battle of “Liborgate,” but the war over the meaning of financial culture is far from over.

The paper is theoretically and methodologically original in its combination of the theories of framing and stasis, and it provides analytical insights into how sense is made of financial culture in the wake of the financial crisis.

This paper aims to approach fundamental topics of financial crime and the law. What does constitute financial crime? Which field of law is best suited to address the threats of transgression by financial executives? What does motivate highly rewarded financiers to become white collar criminals?

To answer these research questions, contemporary theories of criminology in general and of white collar crime in particular, as well as theories on motivation, are critically discussed. Benefits and limitations of the theories in use are exemplified on the background of the London Interbank Offered Rate (LIBOR) scandal.

The paper criticises that the state-of-the-art theories are not able to embrace financial criminality in its entirety. A provoking pace for further research might be that of psychopathic disorders among white collar criminals. Thus, white collar crime maintains its challenging character.

This paper provides a thorough testing of multidisciplinary theories that emerged over the past decades against the recent LIBOR scandal. The research questions addressed and the methodologies applied provide a framework for the assessment of the prevailing theories against other financial scandals.