Financial Benchmark Regulation - Paper - The Effect of Underreporting on LIBOR Rates - Federal Reserve Bank of St. Louis, February 2013

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Financial Benchmarks, IOSCO
First Report Released Consultation Released Comment Deadline
January 11, 2013 April 16, 2013 May 16, 2013

In February 2013, Andrea Monticini and Daniel L. Thornton published a paper, The Effect of Underreporting on LIBOR Rates, as part of the Research Division of the Federal Reserve Bank of St. Louis Working Paper Series. The views expressed are those of the individual authors and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, or the Board of Governors.

From the paper:

"We investigate this issue by testing for structural breaks in the spread between termequivalent LIBOR and CD rates using daily data for the period January 2, 2004, through December 31, 2010. We find evidence consistent with the hypothesis that the underreporting of the LIBOR rates by some banks reduced the reported LIBOR rates. Specifically, we find that the average of 1-and 3-month LIBOR – CD spreads declined by nearly 5.5 basis points by mid-2007. We also find that the LIBOR –CD spreads eventually returned to their pre-underreporting levels."


Related Document: Working Paper in its Entirety[edit]

References[edit]

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