U.K. regulators and banks met to discuss revisions to the setting of global interest rates after lenders faced allegations that they manipulated the benchmark for about $360 trillion of securities.
The meeting was held yesterday to “consider future regulatory and market developments” for the London interbank offered rate, the British Bankers’ Association said in a statement today. Regulators and banks now plan to initiate a “technical discussion” about “likely future developments” with market participants who rely on Libor, the BBA said.
U.K., U.S., Canadian and Japanese regulators have been investigating whether banks misstated Libor submissions to hide their difficulty raising funds or to benefit trading positions in interest rate derivatives tied to the benchmark. The probes have called into question whether lenders can be trusted to set, with no regulatory oversight, a rate that is linked to everything from floating-rate mortgages to commercial loans.
Libor is generated through a daily survey of firms conducted on behalf of the BBA in which banks are asked how much it would cost them to borrow from one another for 15 different time periods, from overnight to one year, in currencies including dollars, euro, yen, and Swiss francs. After a predetermined number of quotes are excluded, those left are averaged and published for each currency before noon.
The BBA says on its website that typically a bank’s treasurer or other nominated individual is the only person at a lender responsible for making Libor submissions. There are also written guidelines on what a submitter should take into account when calculating a firm’s daily rates, the BBA said.