Libor Fixes May Not Be Enough

Investors say new CFTC rules aren’t enough to salvage discredited benchmark.

The blueprint regulators gave Barclays Plc and other banks for correcting Libor-rate abuses may not be enough to salvage a benchmark so discredited it needs to be overhauled.

The U.S. Commodity Futures Trading Commission ordered Barclays on June 27 to keep thorough records on how it comes up with its London interbank offered rate submissions and erect so-called Chinese walls between traders and rate-setters. It also said lenders should expect random checks from regulators on whether their submissions reflect actual borrowing costs. Investors say the plans are little more than window-dressing.

Shares Fall

Barclays fell as much as 3.4 percent in London trading today after tumbling 16 percent yesterday as U.K. lawmakers put pressure on Chief Executive Officer Robert Diamond. Prime Minister David Cameron said that the bank has questions to answer, while Ed Miliband, leader of the opposition Labour Party, has demanded a criminal investigation. Shares in Royal Bank of Scotland Group Plc, which is also being investigated for suspected Libor manipulation, dropped 11 percent.

‘Serious Implications’

The Barclays settlement has “extremely serious implications, which need to be carefully considered,” the BBA said June 27 in an e-mailed statement. “The investigation findings will be fully included in the current review of Libor.”

Incremental Changes

 

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