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Reply #47


Response to Demeter (Reply #35)

Mon Aug 13, 2012, 03:00 PM

47. Banks could be obliged to set Libor rates

http://www.reuters.com/article/2012/08/09/us-banking-libor-review-idUSBRE8781EW20120809

Banks could be obliged to contribute to setting Libor benchmark interest rates after a rigging scandal prompted demands for an overhaul, the British financial regulator in charge of the review said on Thursday. In future, fewer transactions are likely to be based on the London interbank offered rate (Libor) and regulation could be tightened for all financial benchmarks, including those for oil, gold and stock prices, Martin Wheatley, managing director of the Financial Services Authority, told Reuters. On Friday, he is due to publish his review of Libor at the request of the British government.

Used as a benchmark for $500 trillion in contracts for everything from home loans to complex financial derivatives, Libor has been under intense scrutiny since British bank Barclays (BARC.L) was fined more than $450 million in June by U.S. and UK regulators for rigging it. Other international banks on the panel that sets Libor rates are also under investigation. Until now, membership of the panel has been the preserve of a small group of banks, which volunteer daily estimates for the rates at which they would borrow different currencies for different periods to come up with a set of benchmarks. But Wheatley said providing quotes for Libor could become mandatory to widen the number of banks taking part and improve Libor's credibility.

"Whatever the improvements made to Libor, we will want to consider alternative benchmarks for at least some of the types of transaction that currently rely on Libor," Wheatley said.

It was impossible to replace Libor straight away because so many contracts were linked to it and it might not be possible to replace completely because alternatives are not perfect, he said...

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