Economists and statisticians at AACG Economic Consulting have substantial experience in regulatory matters.

LIBOR Litigation

The alleged LIBOR manipulations may have impacted interest rates used by banks, companies and consumers around the globe. Some have claimed that it could have influenced global economic growth. The alleged activities in the LIBOR litigations include a coordinated manipulation of a set of the most important, widely used interest rates in the world. It is this potentially global impact through a fundamental financial building block that sets the alleged LIBOR manipulations apart from this year’s other risk and regulatory-based banking scandals. It will likely be the source of considerable debate, discussion and litigation, as a broad range of market participants from banking giants, global corporations, and pension funds, to single family mortgage payers and savings account holders assess whether they were damaged and by how much.

Is LIBOR Still Being Manipulated?: Identifying Colluders with Methods of Detecting LIBOR Tampering

We analyze the one-month U.S. Dollar London Interbank Offer Rate (LIBOR) between January 1987 and February 2015 to determine whether there are signs of manipulation based on a previously published test that has appeared in a peer reviewed economics journal and been cited in the business press and legal filings of major financial disputes. Our analysis starts with the period from February 1, 2014 to February 28, 2015, after the Intercontinental Exchange (ICE) took over the publication of LIBOR from the British Bankers’ Association (BBA) and after significant time for reforms to be implemented related to the widely publicized LIBOR fixing messages between bankers, as detailed to the British government in the Wheatley Report. We find that this previously published test still indicates the presence of LIBOR manipulation from February 2014 and into 2015. We then perform the previously published test for tracking the integrity of important market indicators, such as LIBOR, from 1987 through February 2015, and find that this test would nearly always trigger a finding of suspicious behavior, either indicating that LIBOR has been consistently manipulated since 1987 to 2015 or that the proposed test has no power to distinguish periods of LIBOR manipulation from periods of non-manipulation. We further discuss the nature of scientific evidence and how the use of non-scientific methods, if taken seriously, can lead to the misallocation of corporate, regulatory, enforcement, and potentially, in the case of such a widely use financial measure as LIBOR, global economic resources.

AACG LIBOR Presentations

  • LIBOR Session One Presentation: What is LIBOR? How is it set? Why does it matter?
  • LIBOR Session Two Presentation: How big could the alleged manipulation be? Are there benchmarks to
    compare to?
  • LIBOR Session Three Presentation: Who could be damaged? What Classes are damaged? Quantifying the effect of the alleged LIBOR manipulation on Banks, Businesses and Consumers.

To obtain a copy of our LIBOR presentations, please contact Dr. Daniel S. Levy.

Mutual Funds and Hedge Funds

We have developed monitoring tools and protocols to identify inappropriate trading behavior, such as Front-Running, Portfolio Pumping/Window Dressing and other trading behaviors that suggest an individual portfolio manager, group, or an entire firm is trading inappropriately. We help Hedge Fund and Mutual Fund clients develop tests that fit the regulatory environment and that are rigorous enough to convince investors that they have the right controls in place to protect investments.

AACG Economic Consulting’s expertise in this area is built on our experience developing scientifically defensible analyses of trading behavior for clients who want to test and verify the quality of their trade monitoring. We also have related experience in litigation and have testified for the SEC in this area.

Contact Our Finance Experts

Daniel S. Levy, PhD
National Managing Director
617 901 6344
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