The British Bankers’ Association said it’s prepared to give up oversight of the London interbank offered rate following claims traders manipulated the benchmark.
Financial Services Authority Managing Director Martin Wheatley began a review into the governance of the rate after Barclays Plc, Britain’s second-biggest lender, paid a record 290 million-pound ($471 million) fine in June for manipulating the benchmark. Regulators worldwide are probing at least a dozen banks globally over allegations traders tried to rig the rate.
“If Mr. Wheatley’s recommendations include a change of responsibility for LIBOR, the BBA will support that,” the London-based lobby group said in a statement today.
The BBA’s role as guardian of the reference for more than $300 trillion of securities has been under pressure since the Bank for International Settlements first raised concern in 2008 that the benchmark was being manipulated. The BBA’s response was branded inadequate by the Bank of England, while U.S. Treasury Secretary Timothy Geithner has said private, unregulated bodies such as the BBA shouldn’t oversee rates such as Libor.
The BBA represents more than 200 banks and lobbies policy makers and regulators on behalf of the industry. The century-old lobby group helped to introduce Libor in January 1986 to cement London’s dominance in the markets for syndicated loans and interest-rate swaps. The benchmark is determined by a daily poll carried out on behalf of the BBA that asks banks to estimate how much it would cost to borrow from each other for different periods and in different currencies.