By Louise Egan and William Schomberg
WASHINGTON, April 18 Global regulators will
provide more clarity in a year's time on guidelines for
financial benchmarks like Libor, Bank of Canada Governor Mark
Carney said on Thursday, after a global rate-rigging scandal led
to calls for reform of the system.
Finance officials from the Group of 20 major economies plan
to task the Financial Stability Board (FSB) - which Carney heads
- with overseeing the reform of such benchmarks, two sources
familiar with the situation told Reuters.
Carney also said the FSB, which coordinates regulators
worldwide, might have a coordinating role in ensuring that any
reforms to reference rates around the world live up to standards
of transparency and good governance.
When asked how long it would take, he said it would probably
be done by "next spring."
"I suspect this will consume a fair bit of time, and
appropriately so, over the next year or so," he said at a
Reuters Newsmaker event in Washington.
Authorities have probed more than a dozen banks in Europe,
Japan and the United States over suspected rigging of the London
interbank offered rate, or Libor, used in financial contracts
worth hundreds of trillions of dollars globally.
Barclays, Royal Bank of Scotland and UBS
have all been fined for manipulating Libor, and
regulators this week came out with a wide set of standards such
widely used benchmarks should meet.
Carney said it was ultimately up to the private sector to
decide whether to change the rate-setting system, with
policymakers setting the bar for good conduct.
"We have to look at whether there are alternatives - the
collective we - and we have to look at the potential costs and
mechanisms for transition and if they are clearly superior," he
said. "I think there's a role for the public sector in that, a
role for the FSB potentially," he said.
An early draft of a communique G20 financial officials will
be debating for release on Friday asks the FSB to take on the
role of overseeing this work, the sources said.
The International Organization of Securities Commissions
(IOSCO) issued a report this week calling for more effective
whistle blowing mechanisms, a code of conduct for individuals
who submit figures for benchmarks and stronger policing of
institutions that compile rates.
IOSCO said it was opening a consultation period on its
proposals, which cover everything from equity swaps to currency
and commodities exchanges, as well as interbank rates and
Carney said market players and policymakers should give
"serious consideration" as to whether global benchmark rates
should be based on actual transactions rather than estimates.
The rate is now compiled by banks submitting quotes for the
rates at which they believe they could borrow from another bank.
CROSS BORDER BLUES
In another thorny issue on the financial reform agenda,
Carney said he would try to solve a brewing international
conflict over how to supervise jointly the $650 trillion
"I'll have some bilateral discussions over the course of
this weekend on exactly those issues, and we would like to see
them resolved by the time leaders meet," Carney said, referring
to a Group of 20 summit in September in Russia.
The top U.S. derivatives regulator wants foreign banks to
stick to the same rules for trading swaps as domestic firms, but
the European Union, Britain and Japan have all urged it to rely
more on foreign regulators.
A group of U.S. Congress members across the political divide
has chided the Commodity Futures Trading Commission over its
aggressive stance, as has EU financial services chief Michel
"It will take some leadership within each of those
jurisdictions to come to an agreement, but I think the will is
there," Carney said.