WRAPUP 1-BBA makes Libor changes; ICAP launches U.S. rate
NEW YORK/LONDON, June 10 (Reuters) - The group that sets the world's most widely tracked interest rates announced steps on Tuesday to boost confidence in its criticized benchmark rate while a big bond dealer launched an alternative measure of borrowing costs for banks with offices in the United States.
The British Bankers' Association said it would expand the number of contributors to its London interbank offered rates and would consider a second daily "fixing" of dollar Libor during U.S. market time. Currently, the rates are fixed, or published, each morning at about 6:45 a.m. EDT (1045 GMT).
The same day London-based broker ICAP (IAP.L) said it would launch its own gauge of lending rates for banks with offices in the United States.
ICAP, which says it is the world's biggest middleman for the bond market, will publish results of its daily rate survey, called the New York Funding Rate, beginning Wednesday morning.
Some market participants had called for an alternative U.S. rate benchmark to Libor because Libor's reliability has been questioned during the current global credit crisis.
The market for short-term loans from one bank to another, that grew out of the U.S. real estate slump and the subsequent collapse of the risky subprime mortgage market, has been stressed.
Nearly a year into the global credit crunch, banks are still hesitant to lend to each other as huge losses suffered on soured mortgage investments have forced them to retain capital and as they distrust the financial health of counterparties.
Just on Tuesday, the interbank cost of borrowing three-month dollar funds posted its biggest rise since Aug. 9, the day the global financial crisis erupted, as banks grappled with the prospect of rising interest rates.
Market participants are likely to view the New York Funding Rate with some skepticism until its volume grows.
Some $150 trillion of financial products around the world are indexed to Libor.
"The Libor market will be far greater in volume at the earliest stages of this," said Tony Crescenzi, chief bond market strategist, Miller, Tabak & Co in New York.
On an anonymous basis, banks will be asked to submit a representative rate for NYFR for where an institution would be likely to obtain funding in the market, rather than report on their own costs that morning, ICAP said.
"Anonymity eliminates finger-pointing and will make it more likely true prices will be reported in a fixing," Crescenzi said.
A daily NYFR poll to set the rate "will be conducted during the New York morning when the Eurodollar market is most active," said ICAP in a statement.
The survey will ask banks for market rates as of 9:15 a.m. (1315 GMT), while the results will be calculated by 10 a.m. (1400 GMT) and disseminated shortly after that, ICAP said.
John Ewan, head of the BBA's Libor group, said the focus of the changes being considered centre on dollar Libor as that's where most concern is.
"That's the one people are paying the most attention to," he said at the BBA's annual conference in London. (Reporting by John Parry and Richard Leong in New York and Jamie McGeever in London; Editing by James Dalgleish)
