Practical analysis for investment professionals
12 July 2012

Libor Scandal Poll: What Did the BoE Know and When Did It Know It?

A recent edition of the CFA Institute Financial NewsBrief polled subscribers with the following question:

Do you think officials at the Bank of England knew the London Interbank Offered Rate was being manipulated during the financial crisis?

Poll Results

Financial NewsBrief Poll Results: Do you think officials at the Bank of England knew the London Interbank Offered Rate was being manipulated during the financial crisis?

Analysis

The pivotal juncture in the Libor scandal appears to be the collapse of Lehman Brothers Holdings. Before the collapse, the spread between actual rates paid and estimates delivered in the rate-setting process was about 6.3 basis points. After the collapse, it jumped to 40 basis points — where it remained. The Bank of England, of course, was in a position to witness all of this — the rates banks actually paid versus the rates they submitted. It’s a small wonder that of 1,179 respondents, almost 92% of professional investors see the BoE as complicit.

About the Author(s)
Ron Rimkus, CFA

Ron Rimkus, CFA, was Director of Economics & Alternative Assets at CFA Institute, where he wrote about economics, monetary policy, currencies, global macro, behavioral finance, fixed income and alternative investments, such as gold and bitcoin (among other things). Previously, he served as SVP and Director of Large-cap Equity Products for BB&T Asset Management, where he led a team of research analysts, 300 regional portfolio managers, client service specialists, and marketing staff. He also served as a Senior Vice President and Lead Portfolio Manager of large-cap equity products at Mesirow Financial. Rimkus earned a BA degree in economics from Brown University and his MBA from the Anderson School of Management at UCLA. Topical Expertise: Alternative Investments · Economics

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