The beautiful shame
Soccer has been whacked with its version of the Libor scandal. The revelation that 680 European and World Cup matches may have been rigged invites comparison with bankers’ manipulation of benchmark interest rates before and during the financial crisis. Both require collusion, are hard to detect, and were partly orchestrated in Singapore. Both also undermine confidence. Sadly, soccer’s flaws are less easily solved.
Fixing a soccer match isn’t easy. Though referees might accept a bribe to influence the outcome, victory or defeat really needs collusion by at least one of the teams. Similarly, Libor calculations are structured to make it hard for a single bank to exert influence. Traders at Barclays, UBS and other lenders got around this problem by co-ordinating their submissions.
The manipulation of Libor, which involved miniscule shifts in interest rates that affected contracts worth trillions of dollars, was hard to detect. Match-fixing is equally tricky to spot. Players can blame luck, fatigue, or the weather for freak results. Singapore is another common thread: a court case in the city-state brought Libor-fixing allegations into the open last year. Now European police say it is home to the masterminds behind the soccer scam.
In both cases, it is hard to find explicit victims: for every lender that undercharged due to a rigged rate, there is a borrower who enjoyed a hidden windfall. Many fans of soccer teams that won rigged matches might prefer a dirty victory to a clean defeat.
The problem with match-fixing, like Libor manipulation, is that it undermines confidence. If matches are decided in advance, spectators will drift away. As in the case of Libor, there’s a lack of untainted alternatives: it’s hard to imagine die-hard soccer fans switching their allegiance to doped-up cyclists. But loss of integrity comes at a high cost, as global banks know only too well.
Reforming Libor means relying less on human judgment. UK regulator Martin Wheatley has proposed backing up all Libor submissions with market data. Unfortunately, soccer cannot do away with referees and is ultimately dependent on corruptible players. The best it can do is prioritise integrity and try to ensure that the benefits of illegal match-fixing are lower than the rewards of keeping the game clean.