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LIBOR the Middle Ages? – University of Reading

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LIBOR the Middle Ages?

Release Date 30 July 2012

Financial experts from the University of Reading have discovered that some of our medieval ancestors were involved in rate-rigging similar to that of the current LIBOR scandal.

Professor Adrian Bell and his team, from the University's ICMA Centre, also found that in 1376 a parliamentary investigation into a financial scandal, remarkably similar to that of Bob Diamond, occurred, resulting in the impeachment of a leading financier.

The financial news has recently been dominated by the LIBOR scandal, with allegations that leading banks have manipulated a key financial standard determining the interest rates charged to millions of borrowers and used in derivatives contracts worth hundreds of trillions of dollars.

But a new interdisciplinary project, based at the University of Reading's ICMA Centre, is investigating the foreign exchange (FX) market in the Middle Ages has revealed that rate rigging is not a new phenomenon.

Professor Adrian Bell said: "A major aim of financial innovation throughout history has been to circumvent regulations and restrictions placed on financial activities. In the Middle Ages, a major obstacle was the religious disapproval of usury - the charging of interest or ‘making money from money'. Indeed, Dante condemned the usurer to the lowest level of the seventh circle of Hell!

"To avoid the ‘taint of usury', medieval financiers developed various methods of disguising interest within other transactions. A key technique used FX transactions. The pound sterling, to take one example, was always valued higher in Venice than in London. These differentials enabled the bankers to profit by moving money from one place to another and back. To produce and maintain these spreads, however, required systematic ‘rigging' of exchange rates across Europe.

"Although such techniques may have been essential for the functioning of medieval finance and perhaps came to be viewed as normal business practice to those involved, the wider public was less understanding. In this way, revelations about the hiding of usury in the Middle Ages or the fixing of LIBOR today contribute to a wider suspicion of finance."

One parallel to the recent appearance of Mr Diamond before the Treasury Select Committee, can be found in the ‘Good Parliament' of 1376. London financier Richard Lyons and other members of the royal court were accused of abusing their position to profit from public funds. Initially the government bowed to public pressure and Lyons was imprisoned in the Tower of London.

Once parliament had dissolved and the public outcry had died down, however, the verdicts of the Good Parliament were reversed and Lyons was released from the Tower. The government also imposed a new, regressive form of taxation, a poll tax paid by everyone rather than a tax levied on goods. It seemed as though everything had returned to business as normal and Lyons appeared to have gotten away with it.

In 1381, however, simmering discontent contributed to a massive popular uprising, the Peasants' Revolt, during which leading government ministers were executed by the rebels. This time Lyons did not escape. He was specifically targeted, dragged from his house and beheaded in the street.

Professor Bell added: "The real question is whether today's public outrage at the LIBOR scandal will lead to fundamental reforms of the financial sector or just more cosmetic changes that fail to tackle the structural issues. Will we have to wait for a 21st century peasants' revolt before seeing any real change?"

For more information about the ‘Medieval Foreign Exchange' project funded by the Leverhulme Trust (grant number RPG-193) see


For all media enquiries please contact James Barr, University of Reading Press Officer on 0118 378 7115 or by email on

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Notes for editors:

ICMA Centre

Part of the Henley Business School, the ICMA Centre was formed as the first active collaboration between the securities industry and a university finance department. We offer a range of undergraduate, postgraduate and executive education, as well as professional and policy development research and consultancy. The ICMA Centre's aim is to deliver the highest standard in financial markets-focused teaching and research. Our unique integration of theory with practice is achieved through the use of the Centre's three state-of-the-art dealing rooms.

Henley Business School

Founded in 1945, by business for business, Henley was the first business school in the UK and is one of the oldest and most respected schools in Europe. Henley's full-service portfolio extends from undergraduate and postgraduate degree programmes to a world-renowned executive education offering, from cutting-edge research spanning a uniquely broad range of fields to specialist consultancy services. One of the very few business schools worldwide to hold triple-accredited status from the major UK, European and US awarding bodies (AMBA, EQUIS, AACSB).

The Leverhulme Trust

The Leverhulme Trust was established in 1925 under the Will of the First Viscount Leverhulme with the instruction that its resources should be used to support 'scholarships for the purposes of research and education'. Since that time, the Trust has provided funding for research projects, fellowships, studentships, bursaries and prizes; it operates across all the academic disciplines, the ambition being to support talented individuals as they realise their personal vision in research and professional training. With annual funding of some £60 million, the Trust is amongst the largest all-subject providers of research funding in the UK.

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