London interbank offered rate.

The outbreak of the LIBOR scandal in the late 2012 has shocked the world and caused a significant disruption in the financial markets. This incident has tremendously affected the confidence of market participants in the credibility of the banks. Till date, there have been a number of literatures on the possible screens that could be used to detect manipulation of the benchmark rate, the results of which, however, have been mixed and inconclusive. This research seeks to extend the methodologies and discussions related to manipulation detection. In addition, it examines closely the underlying events that might have influenced Libor and possibly explained the observed anomalies during periods of the recent financial crisis. Specifically, two methods of anomaly detection are deliberated in this study, namely, the Benford Second Digit Law and rate projection based on historical relation. In order to strengthen the detection methodology, comparative analysis involving four other market-determined short-term borrowing rates are compared and analyzed.The second part of this research evaluates the possible reforms that the Libor system may undergo, analyzing the pros and cons of the changes. To conclude the study, we hope to provide a better understanding and more insights to the issue and at the same time, provide a stepping-stone for future studies.BUSINES