Ben Perry London
THE BRITISH Bankers’ Association (BBA) announced changes yesterday to the transparency of setting the London interbank offered rate (Libor) in a bid to avoid a repeat of last year’s rate-rigging scandal.
The BBA said publication of banks’ individual submissions of the Libor interbank lending rate would be embargoed for three months in a move aimed at avoiding renewed manipulation of the borrowing cost as occurred in the past.
It added that the change, which follows the recommendations of a review initiated by the British government, would take effect from July 1.
The Wheatley Review, published in September last year, had stated that the “BBA should publish individual Libor submissions after three months to reduce the potential for submitters to attempt manipulation, and to reduce any potential interpretation of submissions as a signal of creditworthiness”.
The BBA agreed with the recommendation yesterday, adding, however, that individual bank submissions would “remain available in real-time to the Libor benchmark administrators for the purposes of calculating the rate and for monitoring and surveillance”.
BBA chief executive Anthony Browne said: “Restoring confidence in Libor as a reliable benchmark is an absolute priority for the BBA and we have been working hard with regulatory authorities and the government to put in place the necessary reforms ahead of it transferring to a new owner.”
The BBA is to lose its role of Libor rate-setter in the wake of the rigging crisis.
The European Commission was meanwhile expected to present proposals shortly to tighten up oversight of key financial market benchmarks, especially of interest rates, officials said last week.
A source said a key element could involve moving Libor setting from London to Paris where it would be supervised by the European Securities and Markets Authority.
Libor is calculated daily, using estimates from banks of their own interbank rates. However, the system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.
– Sapa-AFP