JIBAR Manipulation?

The ongoing London Interbank Offer Rate (LIBOR) scandal has contributed to a general distrust in banks. Regulators from across the world are investigating for similar problems in their local markets. South African regulators were quick to report that the Johannesburg Interbank Agreed Rate (JIBAR) is different from LIBOR by being an “actual” interest rate with the implication that manipulation is unlikely. The record of the LIBOR scandal shows that regulators are likely to downplay the events and rather change the system for the better behind the scenes. This possibility, the fact that JIBAR is much more susceptible to manipulation by individual banks than LIBOR and the fact that four international banks, implicated in the LIBOR scandal, participated in setting JIBAR (out of nine contributors) motivates this investigation whether JIBAR could have been manipulated. We found the South African Reserve Bank report on JIBAR to be unconvincing due to internal contradictions and the reliance on tests that are inadequate to identify manipulation. We found it impossible to test for the trading type of manipulation due to the necessary data not being publically available. We found no evidence of the day-of-the-month type of manipulation. We also found that the 3 month JIBAR behaved “normally” over the financial crisis period. But, the behaviour of the 1 month JIBAR over the crisis period was “abnormal” and is indicative of banks submitting too low JIBAR quotes to appear healthier.