Bankers ‘ready to give up right to set Libor’

By MARTIN FLANAGAN
Published on 26/09/2012 00:00

THE British Bankers Association (BBA) is willing to give up its remit for setting the Libor interbank borrowing rate following the recent rate-rigging scandal, the trade body revealed yesterday.

The move comes just days before Martin Wheatley, managing director of the Financial Services Authority (FSA), is due to unveil changes to Libor – the manipulation of which by Barclays traders triggered the ousting of the bank’s chief executive Bob Diamond and chairman Marcus Agius.

The BBA said in a statement yesterday: “If Mr Wheatley’s recommendations include a change of responsibility for Libor, the BBA will support that.”

Critics say a key flaw in Libor, a set of rates underpinning trillions of dollars of global financial instruments, is that they have been based on self-reported borrowing costs by the banks for unspecified loans between them that is open to manipulation.

When Diamond appeared at the Treasury select committee, MPs suggested this rate-rigging by traders had been done both to support their personal trading positions, and possibly to indicate that Barclays’ financial position was stronger than it really was in an extended period of financial volatility.

The BBA hinted in June that it might be happy to give up its rate-setting supervisory role, saying as part of the Wheatley review: “We will now be asking the authorities to consider in what manner the Libor-setting mechanism should be regulated in the future.”