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Winnipeg Free Press - PRINT EDITION
U.K. financial regulator opens LIBOR review
LONDON -- Britain's financial regulator on Friday launched a quick review of the London Interbank Offered Rate (LIBOR), the interest rate index that has been subject of a global scandal, raising questions on how it is regulated and calculated.
Martin Wheatley, managing director of the Financial Services Authority, said Friday he was calling for industry responses by Sept. 7 so proposals can be included in legislation pending in Parliament.
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"The way the use of LIBOR has evolved, as well as the findings from the investigations into its manipulation, highlight that the existing structure and governance of LIBOR is no longer fit for purpose and reform is needed," Wheatley said.
LIBOR, which has come under scrutiny since Barclays bank admitted manipulating rates, is a self-policing system -- banks make a judgment of the rate at which they could borrow from other banks.
LIBOR sets benchmarks for hundreds of trillions of dollars of contracts globally, including mortgages and commercial loans.
"So it's vital that people trust it... so many things, from complex trading in the City through to a person's mortgage and pension, depend on it," Wheatley said.
Wheatley also said stronger powers to prosecute those who bend the rules with regard to LIBOR are also under consideration.
"What's clear to me is that such conduct is not a victimless act simply because it takes place between sophisticated market participants," he said. "It's clear from the reaction to the LIBOR scandal that consumers think the same way."
He is also considering whether LIBOR calculations should be taken away from the British Bankers' Association and placed in the hands of a regulated authority, and whether people who submit rates from various banks will be subject to clearance by the regulator.
Several other banks are under investigation over Libor manipulations in a number of countries.
-- The Associated Press
Republished from the Winnipeg Free Press print edition August 11, 2012 A1
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