Misconceptions of Interest Benchmark Misconduct

Abstract

Attempts to influence Libor and other interest rate benchmarks by procuring or providing false submissions to data collators are examples of misconduct or criminal behaviour that may have taken place for some years before becoming widely known early in the 2007–2009 financial crisis. Subsequent enquiries, litigation, trials and regulatory settlements described conduct that disturbed not only popular opinion but senior financiers and regulators who might have been expected to require ethical behaviour of those concerned. Misconduct and its apparent toleration accordingly contributed to a general loss of trust in the financial sector. This article considers the neglect of interest benchmark misconduct; why distinct forms of misconduct have been wrongly conflated in popular and official narratives and in judicial proceedings; and whether a pervasive loss of trust caused by a perception of widespread misconduct has had lasting commercial or location-specific effects. It also asks 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.