The best way to read this Journal article about how a bunch of banks manipulated Euribor may be: while whistling the theme from The Great Escape:

The goal was for Euribor to be manipulation-proof. … Instead of asking each bank how much it would cost it to borrow from a fellow bank, Euribor was based on a different query: How much would it cost a theoretical “prime bank” to borrow? By making the question theoretical, the EBF tried to remove the risk that a bank would deliberately understate its borrowing costs in an attempt to conceal its financial problems …

THEY SAID IT COULD NOT BE MANIPULATED, BUT ONE MAN MANIPULATED IT ANYWAY. Or a lot of men, and some women. Really pretty much everybody it seems like:

The European Union is expected soon to accuse multiple banks of attempted collusion in the setting of Euribor, according to people briefed on the probe. Barclays PLC has already acknowledged trying to rig the rate, and other banks are likely to be pressed by regulators in the U.S., U.K. and elsewhere into similar admissions, according to industry and regulatory officials. … At least a dozen banks are under investigation, at least four of them for allegedly working with Barclays, according to disclosures by banks and regulators.

My favorite thing about Euribor’s “manipulation-proofing” – which besides the “hypothetical-bank” thing also includes asking a bunch of banks so no one bank has too much influence – is that, while it perhaps reduces the likelihood of manipulation, it greatly reduces the likelihood of proving manipulation. You could see how this would be appealing to a regulator. “Our benchmark is perfect,” you say, “there’s never been a single proven instance of manipulation!” Plus since no facts can ever falsify a Euribor submission, you never have to work that hard to investigate them. Read more »