How to Measure the Economic Integrity of Ibor Panels? A Behavioural Approach

Open access

Summary

IBOR manipulation imposed new benchmark regulations that forced the market to enter a path of the reform of the existing financial indices and the creation of new ones. The paper describes the 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 the efficiency of the process of the production of the interest rate benchmark. The research is supplemented with a behavioural analysis of the 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 impacting on partial quotes of the contributing banks.

Abrantes-Metz R., Kraten M., Metz A., Seow G., 2012, Libor manipulation?, Journal of Banking & Finance, vol. 36, no. 1, pp. 136-150.

ACI Polska, 2013, Regulamin fixingu stawek referencyjnych WIBOR i WIBID, 1.07.2013.

Avery C., Zemsky P., 1998, Multidimensional uncertainty and herd behavior in financial markets, American Economic Review, 88 (4/September), pp. 724-748

BIS, 2013, Towards Better Reference Rates Practices: A Central Bank Perspective, Bank for International Settlements, March.

Brousseau V., Chailloux A., Durre A., 2013, Fixing the fixings: What road to a more representative money market benchmark?, IMF Working Paper, no. 13/131, May 29.

Duffie D., Stein J., 2015, Reforming LIBOR and other financial market benchmarks, Journal of Economic Perspectives, vol. 29, no. 2, Spring, pp. 191-212.

EBA/ESMA, 2013, ESMA-EBA Principles for Benchmark-Setting Processes in the EU, ESMA/2013/659, June 6.

EP, 2016, Regulation of the European Parliament and of the Council on Indices Used as Benchmarks in Financial Instruments and Financial Contracts, Brussels, 8.06.2016.

Flavell R., 2002, Swaps and Other Derivatives, Wiley & Sons, London.

FSB, 2014, Reforming Major Interest Rate Benchmarks, Financial Stability Board report, July 22. Gandhi P., Golez B., Jackwerth J.C., Plazzi A., 2015, Libor Manipulation: Cui Bono?, Finance Research Seminar, April.

GPWB, 2017, Regulamin stawek referencyjnych WIBID i WIBOR, 30.11.2017.

Gradoń W., 2013, Propozycje zmian wyznaczania stóp rynku międzybankowego określających rzeczywistą cenę pieniądza, Studia Ekonomiczne, 173, pp. 81-94.

Hou D., Skeie D., 2014, LIBOR: Origins, Economics, Crisis, Scandal and Reform, Federal Reserve Bank of New York Staff Report, no. 667, March.

IBA, 2017, ICE Libor Output Statement, 3.03.2017.

IOSCO, 2013, Principles for Financial Benchmarks Final Report, OICU-IOSCO, FR 07/13, July.

Kirti D., 2017, What are reference rates for?, IMF Working Paper, WP/17/13, January.

Lynch A., 2000, Thought contagions in the stock market, The Journal of Psychology and Financial Markets, 1.1, pp. 10-23.

Maciaszczyk M., 2018, Znikający rynek stawek WIBOR. Efekt zmian regulacyjnych dla wyceny stóp rynku międzybankowego w Polsce, Bank i Kredyt, 3, pp. 217-252.

Mielus P., 2016, Dylematy reformy indeksów rynku finansowego, Gospodarka Narodowa, 4/2016, pp. 91-114.

Mielus P., 2017, Vicious circle of the benchmark reform, Bezpieczny Bank, vol. 69, no. 4, pp. 108-129.

Mielus P., 2018, Behavioural aspects of benchmark quotation – the WIBOR case, Acta Universitatis Lodziensis Folia Oeconomica, 3(335), pp. 189-205.

Mielus P., Mironczuk T., 2015, Structure of the cost of deposits in selected EU Countries, Bezpieczny Bank, no. 3(60), pp. 89-101.

MPG, 2014, Market Participants Group on Reforming Interest Rate Benchmarks, MPG Final Report, March.

Shiller R., 1995, Conversation, information, and herd behavior, American Economic Review, 85 (2), May, pp. 181-185.

Wheatley, 2012, The Wheatley Review of LIBOR: Final Report, HM Treasury, September.