Intercontinental Exchange Inc., which took over administeringthe London interbank offered rate this year, is planning to excusethe smallest banks from paying new fees it started charging usersof the interest-rate benchmark, according to a person withknowledge of the matter.

The decision follows pushback from banking groups, one of whichsaid that some lenders might stop using Libor as a benchmark fortheir loans because they considered the licensing fee too high.More than $300 trillion of securities, loans and derivatives aretied to the measure.

“It's valuable that they appear to have recognized that ablanket fee was cost prohibitive for a lot of small institutions,”Denyette DePierro, a vice president and senior counsel at theAmerican Bankers Association, said yesterday in a telephoneinterview. “We've been having extensive conversations with themsince July, and the fact that we're expecting them to be responsiveis positive.”

Banks with less than $1.5 billion of assets will pay nothing,while the fee will be cut to $2,000 from $16,000 for those with$1.5 billion to $10 billion of assets, said the person, who askednot to be named because the decision hasn't been announced. Theannual fee covers actions such as references to Libor in contractsand its use in setting loan rates.

Brookly McLaughlin, an ICE spokeswoman, declined to comment.Chief Executive Officer Jeff Sprecher said on an Aug. 7 conferencecall to discuss earnings that the company would be taking input and“fine tuning” its approach to the fees.

Libor, previously managed by the British Bankers Association,came under scrutiny by regulators across the globe amid allegationsthat traders manipulated key market benchmarks for profit.

Intercontinental Exchange's ICE Benchmark Administration unitlast month proposed standardizing how banks calculate theirsubmissions as it seeks to bolster confidence in the measure. Thecompany has cited the costs involved in modernizing the benchmarkas justifying the new fees, which can be as high as $40,000annually for using Libor in multiple currencies.

Aleis Stokes, a spokeswoman for the Independent CommunityBankers of America, didn't respond to messages seeking commentyesterday. The group had told ICE in a letter that the new feeswould be “very problematic for thousands” of lenders.

Bloomberg News

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