LIBOR Likely Not Only Benchmark Manipulated: Regulators

In a Sept. 14 statement, Masamichi Kono, chairman of the IOSCO board, had said, “IOSCO, as the international organization of financial market regulators, is firmly committed to restoring confidence in benchmarking activities globally.” The discussion paper revealed, among other things, that approximately 80% of benchmarks were compiled by either associations or private entities.

The discussion paper indicated that survey-based benchmarks, such as LIBOR, were sometimes reached via subjective criteria that were open to individual interpretation. In cases in which benchmarks were based on actual transaction data, the entities compiling them still have discretion over whether to produce actual rates or prices.

In part, the authors of the paper wrote, “The risk of manipulation will be greater where participants in the process have both incentive and opportunity to submit inaccurate data or apply a methodology inaccurately. Furthermore, where judgment is required in determining the data to be submitted, the problem is particularly acute.” They continued, “Presently, there is little evidence that the current scope and severity of global sanctions regimes provides effective deterrence.”