This chapter provides a brief history of LIBOR, the London Interbank Offered Rate, tracing both market developments and the macro-economic and regulatory environment in which it was created. Beginning as an informal measure used in the London Eurodollar market of the 1960s, LIBOR made the transition to a formal benchmark in the mid-1980s, eventually becoming the most widely used benchmark in the world by the late 1990s.

This chapter argues that we need new political and economic institutions which are participatory, inclusive and accessible and sets out some ideas about how this can be achieved. These can be the catalyst for the development of a popular democratic culture of public participation in economic discussion and decision making.

This chapter makes the academic, educational, practical and political case for pluralism in economics. It uses case studies of macroeconomics, the environment and inequality, to demonstrate that academic economics must open up to new ways of thinking.

In this chapter the focus is on the comments and claims made about LIBOR prior to the beginning of the formal investigations by the Financial Services Authority and the US Commodity Futures Trading Commission. As usual, after any scandal is revealed, the question immediately arose as to why the regulators had not disied the wrongdoing earlier and taken action against those involved. This chapter sets out who knew what, considering the reasons both for the failure to detect what was going on with LIBOR and for the alleged failure to take prompt action.

This chapter shows how much the foreign exchange market has changed and developed over the years. It also reveals what goes on behind the scenes when buying foreign exchange at a bureau de change, paying bills to a company in another country or booking a hotel using a credit card on the internet or by telephone. The days of noisy trading floors where dealers shouted at each other have long gone, replaced by computers and people tapping at keyboards or talking quietly to each other. When did the foreign exchange market start to change and why does it matter?

This chapter uses evidence collected by regulators to demonstrate how dealers’ practice of acting as principals rather than agents put their clients at risk. Containing extensive excerpts from traders’ communications, it demonstrates how they managed their manipulations and in what environment it all took place.

This chapter traces the history of financial regulation in the UK. It challenges the widely held belief that the period from the 1980s witnessed a systematic process of deregulation. In fact, from the 1970s there was a period of increasing regulation up until the mid-2000s, when the government began to encourage a ‘light touch’ approach. The combination of all these factors meant that banks were ill-prepared to meet the financial crisis. In its aftermath, as the banks embarked on the slow path to reiy, making profits was essential. The traders seized any opportunity they could, and it may well be the case that banks were simply relieved that some areas of their business were profitable.

This chapter describes the effects of the Financial Stability Board’s review of interest rate benchmarks. The Board’s report recommended a number of measures to help improve security, notably by underpinning existing IBORS with transactions data and by developing alternative, nearly risk-free rates. New benchmarks would be developed with reference to the ISOCO Principles published in July 2013. The chapter explains these principles and how they were put into practice.

This chapter charts the loss of faith in LIBOR that began to set in during the financial crisis, particularly following two articles in the Wall Street Journal. Investigation by the regulators subsequently revealed that a number of early warnings had been overlooked, and that certain banks had been distorting rates since at least 2005. Drawing on reports by the UK’s Financial Services Authority, the chapter demonstrates the day-to-day manipulation practised by traders at Barclays, the Royal Bank of Scotland and UBS.