Published on Bloomberg, by Liam Vaughan, August 21, 2012.
Every two months, representatives from the world’s largest banks meet at an undisclosed location to review the London interbank offered rate.
Who sits on the British Bankers’ Association’s Foreign Exchange and Money Markets Committee, the body that governs the benchmark for more than $300 trillion of securities worldwide, is a secret. No minutes are published. The BBA won’t identify any members, saying it wants to protect them from being lobbied, and declined to make the chairman available for interview.
The group’s lack of transparency is symptomatic of a self- regulated system that failed to stop traders around the world manipulating the world’s most widely used benchmark interest rate for profit. Martin Wheatley, the British regulator charged with reviewing Libor after the scandal, is now weighing whether to bring oversight under the control of regulators.
“Politically something has to fundamentally change in the way that Libor is run,” said Owen Watkins, a former regulator at the U.K. Financial Services Authority and now a lawyer at Lewis Silkin LLP in London. “The obvious way to change it is to have regulators more involved than they were in the past.”
The group has sole responsibility for all aspects of the functioning and development of Libor, according to the BBA. Its functions include the design of the benchmark, which banks sit on the panels that determine the rate, and scrutiny of all rates submitted.
Highly Experienced: … //
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The committee may be reluctant to ban lenders, because that would make it hard to construct a workable rate, said Finance Watch’s Ford. The dozen banks still being probed are among the biggest players in an illiquid interbank market, he said.
In Japan, regulators have suspended banks for lapses in their rate-submission processes. In December, the Financial Services Agency ordered UBS AG to suspend trading for a week in derivatives tied to yen Libor and Euroyen Tibor, the Tokyo Interbank Offered Rate for yen held overseas. The following month, Citigroup’s Tokyo-based trading unit was banned from dealing in securities tied to Libor and Tibor, the Tokyo interbank offered rate, for two weeks.
Links – videos on The Real News Network TRNN, by Paul Jay:
- Black Report: No Criminal Prosecution of Wall St. and Who is the European, Romney or Obama? 16.49 min, August 20, 2012;
- LIBOR Rate-Fixing Scandal Sets Off Investigations, Lawsuits Against Big Banks, 8.36 min, August 10, 2012;
- Quebec’s Red Square Movement – The Story So Far, on New Socialist, by David Camfield, August 5, 2012;
- The Black Financial and Fraud Report: Agency Says No to Mortgage Relief, 10.43 min, August 1, 2012;
- LIBOR – Insider Trading on a Massive Scale, 14.21 min, July 29, 2012;
- Bill Black Reports: LIBOR and HSBC, 10.43 min, July 25, 2012;
- Bill Black: What I’d Demand of the Fed, 11.46 min, Oct. 25, 2011.