Template-Type: ReDIF-Article 1.0

Author-Name: Dániel Béres
Author-Workplace-Name: Budapest Metropolitan University
Author-Email: dberes@metropolitan.hu
Author-Person: pbe828

Title: Integrity of Financial Benchmarks

Abstract: This study presents how financial benchmarks have become beacons for the world
of economy and finance. Through the example of the Budapest Interbank Offered
Rate (hereinafter: BUBOR), the study evaluates the practical applicability of
the methods that may be used to prevent or detect attempts at manipulating
interbank rates used as financial benchmarks. It points out that a payment systembased
financial benchmark model could contribute significantly to eliminating
the manipulation risk associated with the fixing of benchmark rates. The author
reviews the extent to which the given benchmark (BUBOR) is exposed to potential
manipulation attempts in two different periods, each comprising 6 scenarios. He
finds that a low interest rate environment and the low standard deviation of the
fixing submissions combined with the methodology applied essentially reduced
the manipulation potential to almost zero. This also means that in periods of less
volatile fixing submissions it is justified and substantiated to reduce the resources
spent on supervising and auditing the production process of benchmark rates.
Introducing specific methods may prompt an adjustment on the part of the banks
contributing to the fixing (panel banks), which may weaken or strengthen the
efficiency of the method concerned.

Classification-JEL: B25, B26, C10, C52, D53, D69, G28
Keywords: interbank offered rate, benchmark rate, methodology, BUBOR, LIBOR, manipulation
Pages: 33-59
Volume: 18
Issue: 1
Year: 2019
File-URL: http://english.hitelintezetiszemle.hu/letoltes/fer-18-1-st2-beres.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:18:y:2019:i:1:p:33-59