- Who knew this re: 2018 Libor? Archived Message
Posted by Gerard
on November 20, 2019, 4:13 pm
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"As of April 2018, the IBA submitted a new proposal to strengthen the LIBOR calculation methodology. It suggested using a standardized, transaction-based, data-driven, layered method called the Waterfall Methodology for determining LIBOR. The first transaction-based level involves taking a volume-weighted average price (VWAP) of all eligible transactions a panel bank may have assigned a higher weighting for transactions booked closer to 11:00 a.m. London time. The second transaction-derived level involved taking submissions based on transaction-derived data from a panel bank if it does not have a sufficient number of eligible transactions to make a Level 1 submission. The third level—expert judgment—comes into play when a panel bank fails to make a Level 1 or a Level 2 submission. It submits the rate at which it could finance itself at 11:00 a.m. London time with reference to the unsecured, wholesale funding market. The Waterfall Methodology retains the trimmed average calculation. The IBA calculates the LIBOR rate using a trimmed mean approach applied to all the responses received. Trimmed mean is a method of averaging which eliminates a small specified percentage of the largest and smallest values before calculating the mean. For LIBOR, figures in the highest and lowest quartile are thrown out and averaging is performed on the remaining numbers." https://www.investopedia.com/terms/l/libor.asp "Major banks allegedly colluded to manipulate the LIBOR rates. They took traders' requests into account and submitted artificially low LIBOR rates to keep them at their preferred levels. The intention behind the alleged malpractice was to bump up traders’ profits who were holding positions in LIBOR-based financial securities*." *Really...looking in the wrong place for that aren't we..? Yeah "privatise" the accusation and make it a "conspiracy of individuals"...the more destructive and inconvenient truth (for the neo/con-liberals), is that elected public representatives colluded with the massive forces of the Libor panel of global banks to obfuscate, circumscribe and misrepresent the true exposure of the U.K's financial services industry to the credit crunch. |
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