The group that administers the London interbank offered rate,seeking to bolster confidence in the benchmark after a manipulationscandal, is proposing to standardize how the banks calculate theirsubmissions.

Global regulators said in July the rate, the key interestbenchmark for more than $300 trillion of securities worldwide,shouldn't rely on estimates that allowed traders at some of theworld's biggest banks to manipulate Libor. At least nine firms,including Barclays Plc and Royal Bank of Scotland Group Plc, havebeen fined more than $6 billion after traders colluded to rig therate and related benchmarks for profit.

Banks are still using a range of different methods to calculatetheir submissions, ICE Benchmark Administration, the unit ofIntercontinental Exchange Inc. that took responsibility for therate in February, said in a statement today.

“It is in the interests of users of Libor and benchmarksubmitters alike that a more unified transaction-based methodologyshould be adopted,” ICE Benchmark Administration said. “Wetherefore propose a more prescriptive calculation methodology withpre-defined parameters that our oversight committee will keep underreview.”

The group proposed expanding the universe of transactions onwhich banks can base their submissions to include their wholesalefunding deposits, commercial paper and primary issuancecertificates of deposit. Other data from repurchase agreements andthe overnight indexed swap rate would only be included when a lackof data would otherwise force firms to rely on judgment.

Libor is calculated by a daily poll that asks firms to estimatehow much it would cost to borrow from each other for differentperiods and in different currencies. The top and bottom quartilesof quotes are excluded, and those left are averaged and publishedfor individual currencies before noon in London.

The panel said it's also weighing alternatives to what it calledthat “topping and tailing” exercise and whether it should “smooth”the rate published rate to reduce its volatility. Firms have untilDec. 19 to submit their responses.

Bloomberg News

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