LONDON, July 22 Global regulators have proposed
a multi-pronged approach to making interest rate benchmarks like
Libor less prone to manipulation.
Ten banks and brokerages have paid around $6 billion to date
to settle U.S. and European regulatory allegations that they
manipulated the London Interbank Offered Rate, or Libor, a
benchmark against which around $450 trillion of financial
products from derivatives to home loans are priced worldwide.
The Financial Stability Board (FSB), which advises the G20
group of leading economies on regulation, said it agreed with
market practitioners on a so-called "multiple-rate approach".
This will involve strengthening existing interest rate
benchmarks like Libor and its continental European counterpart
Euribor by underpinning them to the greatest extent possible
with market transactions data, the FSB said.
The approach also includes developing alternative "nearly
risk free reference rates", it added.
"There are several reasons for this heterogeneity including
differing availability of underlying transactions data,
different markets for near-risk-free rates, and different levels
of willingness and scope to use supervisory or other means to
encourage market participants to adapt to the multiple-rate
approach," the FSB said in a statement.
(Reporting by Huw Jones, editing by Matt Scuffham)