Wednesday, 26 November 2008

Looking into Libor

A quick plug for a really interesting post on the TUC blog Touchstone, which looks at how Libor gets set. As Adam suggests, most people probably assume that Libor - the rate at which banks lend to each other - is some free-floating measure over which no-one has any control. Not so. This is an area that definitely deserves a bit more scrutiny, so go and have a read.

1 comment:

Nick Drew said...

yes it was interesting and written with appropriate caution

I know nothing about the setting of LIBOR but I do know a lot about the setting of published prices in other spheres, where equally, from time to time, observers cast doubt (from a reasonable a priori standpoint) but they are just plain wrong

there is (periodically) every bit as much at stake for (some) players in these other environments, too, and yet the checks and balances work well. once in a blue moon a 'rogue' contribution is encountered and it gets slammed

(interestingly, Gordon Brown's fabled FSA has never taken an interest in these 'rogue' epsisodes, even though (a) they have been reported (b) the prima facie motivation is always to 'make a false market', a well known offence under the meaning of the Act. so the 'slamming' is always by way of self-policing within the sector)