The UK’s chief markets regulator has said banks that set the Libor interest rate are seeking a “scientific” process that will limit future liability from the scandal-ridden benchmark.
Martin Wheatley, managing director of the Financial Services Authority, said yesterday that the discredited interest rate benchmark was no longer fit for purpose.
Lenders on the Libor panel, which include RBS and Barclays, would prefer Libor be set “on a very clean basis that takes their risk down,” Mr Wheatley said.
A “trade reporting mechanism” to calculate the figure based on actual data is one option he is considering as part of proposals to reform Libor released today.
He is conducting a review of the oversight and setting of Libor after Barclays, the UK’s second-largest bank, was fined a record £290 million (€370 million) by US and UK authorities for rigging the rate to benefit its own derivatives trades and to appear healthier during the financial crisis. – (Bloomberg)
