Libor Changes Could Add Volatility (Reuters)

Proposed reforms could also mean somewhat higher rate.

Proposed reforms in the way Libor is compiled could lead to more volatility in short-term bank funding, Reuters reports.

On Friday, British regulators unveiled a proposed overhaul that includes increasing the number of banks that submit data and requiring banks to back up estimates with information about other market rates.

JPMorgan money market Alex Roever notes that after Barclays reached a settlement with the U.S. Commodity Futures Trading Commission, a settlement that required it to substantiate its submissions by citing other rates, the volatility in its Libor submissions increased.

And adding more banks could mean bringing in banks with lower ratings, which in turn could boost Libor.

 

See the full story here. For more on plans to fix Libor, see FSA to Oversee Libor in Overhaul.

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