BBC News, 9
July 2013
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Stories
Barclays, UBS and RBS have all been implicated in the Libor scandal |
NYSE
Euronext has won the contract for setting the London Inter-bank Offered Rate
(Libor), a government-backed committee announced.
Libor is
used to set trillions of dollars of financial contracts.
The move
follows the revelation that banks had been manipulating the rate. Barclays, UBS
and RBS have all been fined for their roles in the scandal.
They were
found to have colluded in fixing the Libor setting in order to boost the
profits of traders in the run-up to the financial crisis.
The new
rate-setting body, to be known as NYSE Euronext Rate Administration, will be
based in the UK and regulated by the Financial Conduct Authority (FCA).
'Significant
step'
"This
change will play a vital role in restoring the international credibility of
Libor," said Baroness Hogg, chair of the committee tasked with selecting a
new administrator for the interest rate.
"Today
marks a significant step in implementing the recommendations in my review of
Libor," said Martin Wheatley, chief executive of the FCA and author of a
report for the government on how the interest rate should be reformed.
"The
selection of a new administrator, who will need to be authorised, and then
subject to ongoing scrutiny by the FCA, is an important step in enhancing the
integrity of Libor."
Libor is
set in London and is meant to reflect the average rate that banks pay to lend
to each other.
It is used
to benchmark everything from car loans and mortgages to complex financial
transactions around the world.
'Restoring
confidence'
At the
moment, it is calculated by Thomson Reuters for the British Bankers'
Association (BBA), based on estimates received from 16 major international
banks in London of how much they must pay in order to borrow cash from other
banks.
The BBA
welcomed the move and said that restoring confidence in Libor was a priority.
"We
have been working hard with regulatory authorities and the government to put in
place much-needed reforms to the system," said BBA's chief executive
Anthony Browne.
"The
new administrator will take over a benchmark with better regulatory oversight
and improved governance."
The new
entity is expected to take over the running of Libor by the beginning of next
year. In the interim, Thomson Reuters will continue to make the calculations.
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