A panel of European Union lawmakers will ask regulators fromthree continents today why authorities failed to crack down on aculture of rigging interest rates.

Michel Barnier, the EU's financial services chief, will testifyto a European Parliament panel along with Gary Gensler, chairman ofthe U.S. Commodity Futures Trading Commission, and Masamichi Kono,board chairman of the International Organization of SecuritiesCommissions, in Brussels today.

Confidence in Libor, the benchmark interest rate for more than$500 trillion of securities, plummeted following Barclays Plc'sadmission in June that it submitted false rates. The revelationsprovoked renewed calls for tougher oversight of the financialsystem and pushed regulatory and criminal probes of interbanklending rates to the top of the political agenda.

“The culture of the banking industry has not changed and thisculture was aided and abetted by regulatory failures,” ArleneMcCarthy, the Labour lawmaker chairing today's panel, said in ane-mailed statement.

Barclays was fined 290 million pounds ($471 million), thelargest penalties ever imposed by regulators in the U.S. and U.K.,after admitting it submitted false London and euro interbankoffered rates. Its settlements with the U.K.'s Financial ServicesAuthority, Gensler's CFTC and the U.S. Department of Justice arethe first in an international investigation into whether bankstried to manipulate Libor and other benchmarks.

“It is time for a new or revised benchmark,” Gensler said inprepared remarks for today's hearing. It should be “a healthybenchmark anchored in actual, observable market transactions.”

The rates scandal triggered probes by EU CompetitionCommissioner Joaquin Almunia, who will also attend today's hearing,while the European Securities and Markets Authority and theEuropean Banking Authority are working on guidelines for rates toavoid conflicts of interest in the benchmarks.

“I'm curious to see how authorities respond to what amounts tothe largest fraud in economic history,” Philippe Lamberts, a Greenlawmaker in the parliament, said in a telephone interview.

The EU session is followed later this week by a report fromMartin Wheatley, managing director of the FSA, on a regulatoryoverhaul of Libor.

Rate-riggers face harsher punishments in the EU in the wake ofthe revelations. The parliament's economic and monetary affairscommittee is preparing to vote on Oct. 8 to boost the bloc'ssanctions against market abuse, including jail sentences for bankstaff found guilty of collusion to fix inter-bank lendingbenchmarks.

Financial Penalties

The EU plans would also set financial penalties for attemptedmanipulation of rates. The commission is also seeking views onpossible rules to overhaul Libor, Euribor and other marketbenchmarks.

EU regulators are weighing options such as forcing banks toprovide real transaction data rather than estimates and increasingthe number of lenders involved in the rate setting.

“Reform does not need to take place at an EU level,” SyedKamall, a conservative lawmaker representing London in the EuropeanParliament, said in an e-mail. “The commission is looking for anyexcuse to regulate the City.”

Dan Doctoroff, chief executive officer of Bloomberg LP, willalso speak at the EU parliament event today.

In a Wall Street Journal editorial Aug. 2, Doctoroff proposed analternative to Libor dubbed the Bloomberg Interbank Offered Rate,or Blibor, and offered to manage it as a service to globalfinancial markets. Bloomberg LP is the parent of BloombergNews.

Material changes to the way Libor is calculated riskinvalidating millions of financial contracts, covering productsranging from mortgages to derivatives, Wheatley, the U.K.'s chiefmarkets regulator, has said.

Any changes to the established Libor benchmark would need tohave a “carefully planned and managed transition in order to limitdisruption to the huge volume of outstanding contracts” thatreference it, Wheatley said last month.

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