British government begins review of the Libor compilation process
Source: Agencies |
July 31, 2012, Tuesday
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Print Edition
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BRITAIN'S government set out the terms for a revamp of a key interest rate rigged by a number of banks, including Barclays, saying yesterday urgent reform is required.
The review will be conducted by Martin Wheatley, a top official at the Financial Services Authority regulator.
It will look at how Libor is constructed, the feasibility of using actual trades, governance, the potential for alternative rate-setting processes and how to move to a new regime.
Sanctions for abuse of Libor and whether the rate, currently supervised by its sponsor, the British Bankers' Association, should be formally and directly regulated under UK law.
"The benchmark rate is used globally for trillions of dollars worth of financial contracts. Therefore, it is clear that urgent reform of the Libor compilation process is required," Wheatley said in a statement published by the Treasury.
"The review will also consider whether similar measures are required for other existing benchmarks," Wheatley said.
Wheatley yesterday met members of the panel of banks that feed their data into the current rate-setting process.
He will publish a discussion paper on August 10 to kick off a four-week public consultation. Final conclusions will be made public by the end of September.
Britain's Finance Minister George Osborne will then consider how Wheatley's recommendations can be incorporated into a financial services draft law already making its way through parliament.
The FSA and US authorities fined Barclays a record US$453 million for trying to influence Libor, the London interbank offered rate, which is the rate that banks are willing to lend to each other.
UK lender Royal Bank of Scotland signaled on Sunday in a Guardian newspaper interview that it too faced a fine for its role in the rate-rigging scandal as authorities across the world probe about 20 banks.
HSBC bank said it has been named as a defendant in US private lawsuits linked to Libor and its Continental European counterpart Euribor.
The review will be conducted by Martin Wheatley, a top official at the Financial Services Authority regulator.
It will look at how Libor is constructed, the feasibility of using actual trades, governance, the potential for alternative rate-setting processes and how to move to a new regime.
Sanctions for abuse of Libor and whether the rate, currently supervised by its sponsor, the British Bankers' Association, should be formally and directly regulated under UK law.
"The benchmark rate is used globally for trillions of dollars worth of financial contracts. Therefore, it is clear that urgent reform of the Libor compilation process is required," Wheatley said in a statement published by the Treasury.
"The review will also consider whether similar measures are required for other existing benchmarks," Wheatley said.
Wheatley yesterday met members of the panel of banks that feed their data into the current rate-setting process.
He will publish a discussion paper on August 10 to kick off a four-week public consultation. Final conclusions will be made public by the end of September.
Britain's Finance Minister George Osborne will then consider how Wheatley's recommendations can be incorporated into a financial services draft law already making its way through parliament.
The FSA and US authorities fined Barclays a record US$453 million for trying to influence Libor, the London interbank offered rate, which is the rate that banks are willing to lend to each other.
UK lender Royal Bank of Scotland signaled on Sunday in a Guardian newspaper interview that it too faced a fine for its role in the rate-rigging scandal as authorities across the world probe about 20 banks.
HSBC bank said it has been named as a defendant in US private lawsuits linked to Libor and its Continental European counterpart Euribor.
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