The scandal-hit London interbank offered rate, or Libor, is relocating from the City to Wall Street after the company behind the New York Stock Exchange won a bid to take it over, a UK committee has ruled.
The independent panel, set up by the UK Treasury, yesterday chose NYSE Euronext to take over Libor from the British Bankers’ Association (BBA), which had supervised the rate-setting since its inception in the 1980s. The changeover is scheduled to be completed by early 2014. The panel did not identify other bidders.
Baroness Sarah Hogg, chair of the panel, said in a statement: “This change will play a vital role in restoring the international credibility of Libor.”
Libor underpins trillions of dollars of transactions all over the world, but the rate was underpinned by an honour system that relied on the banks to be honest. Revelations of its manipulation last summer both shocked the financial community and forced a reform in how it was administered.
The scandal emerged when authorities realised banks – including Barclays, Royal Bank of Scotland and UBS – were submitting false data to gain market advantages. US and UK regulators fined RBS more than £350 million for rate-rigging. Barclays’ role led to a £290m fine and the resignation of chief executive, Bob Diamond. Swiss bank UBS was fined £1 billion.
After the scandal erupted, the government established the panel to review the rate and introduce criminal penalties for rule violators.