LONDON Nov 19 Replacing the quote-based Libor
with an index drawing on actual market trades won't happen
anytime soon, the benchmark's new administrator said on Tuesday.
The London Interbank Offered Rate is compiled from quotes by
banks of the rate they believe they would pay to borrow from
Barclays, Royal Bank of Scotland and others
have been fined for manipulating Libor, sparking calls from the
United States, where the rate is a reference in home loans, for
a new index based on actual market transactions.
Britain passed a law requiring Libor to have a new
administrator, stripping the British Bankers' Association trade
body of that role.
Transatlantic exchanges group NYSE Euronext, which was
acquired by ICE last week, won the tender to administer
Libor. It said on Tuesday the transition from the BBA to ICE
will be completed early next year.
The focus now is on a smooth transition to the new
administrator and restoring confidence in the index rather than
wholesale change in the benchmark's composition, Finbarr
Hutcheson, who heads the new administrator, said.
"We will be very transparent on how Libor is set," Hutcheson
told a Financial Conduct Authority conference.
Britain is facing pressure from the United States to replace
Libor with a market-based index, which is considered less
vulnerable to rigging.
Andrew Hauser, head of sterling markets at the Bank of
England, said the "palette of benchmarks" needed to be expanded,
even if the number of alternatives will be limited.
Referring to calls for a market-based index, Hutcheson said,
"The reality is that that doesn't exist at the moment. There is
no simple answer."
Global regulators, such as the Financial Stability Board,
are studying how transition to market-based alternatives could
take place, with the outcome due next year.
"Right now our focus is on a smooth transition," Hutcheson
John Grout of the Association of Corporate Treasurers said
the call for a market-based index came mainly from politicians.
But such an index could also caused problems when there are no
transactions, he said.
"We have no more faith in transaction-based benchmarks than
in good-faith-based indices," Grout told the conference, adding
that strict new controls on Libor were restoring confidence in
Hutcheson said once the infrastructure is in place for
administering Libor, ICE "will be looking to leverage that as
much as we can in other oppportunities for benchmark
A new European Union law now being approved is expected to
require independent administrators for a range of major
benchmarks used across Europe.