Reuters - Video

Edition: US | UK | IN | CN | JP

Finance Videos

UK financial watchdog: Libor can be fixed

Friday, September 28, 2012 - 02:08

Sept. 28 - Britain's top financial watchdog, the Financial Services Authority has delivered a 10-point plan to fix Libor, the benchmark interbank lending rate, after multiple banks were accused of trying to manipulate it. Joanna Partridge reports

▲ Hide Transcript

View Transcript

SOUNDBITE: Martin Wheatley, Head of the Financial Services Authority, saying (English): "Organisations and individuals were basically left unchecked and were free to act without scrutiny, leading to abuse of the system. They essentially exploited this lack of checks and balances." That's the verdict from Martin Wheatley, head of Britain's top financial watchdog, the Financial Services Authority. The FSA has outlined a 10-point plan to fix Libor, the benchmark interbank lending rate. It launched a review after multiple banks were accused of trying to manipulate Libor, the interest rate for trillions of transactions. In June, Barclays agreed to pay over $450 million to U.S. and UK authorities to settle allegation that it had submitted false rates. SOUNDBITE: Martin Wheatley, Head of the Financial Services Authority, saying (English): "The system is broken, and needs complete overhaul. The disturbing events that we have uncovered in the manipulation of Libor have severely tarnished confidence and our trust, it has torn the very fabric of our financial system. Today, we need to press the reset button, we need to get back to what this reference rate is supposed to be, we need to restore integrity to a globally important benchmark, and we need to get to a position where individuals act with integrity." He said Libor has to be fixed, not scrapped, as it plays such a key role in the financial system. Under Wheatley's reform programme, the banks which contribute data used to calculate Libor will be audited. And from now on, the rate will be based on actual borrowing transactions rather than estimations, which left room for manipulation. The rate was overseen by the British Bankers' Association. Instead, a new oversight panel will do so. Nick Motson from the Cass Business School wonders who would want the job. SOUNDBITE: Nick Motson, Lecturer in Finance, Cass Business School, saying (English): "The burden that is placed on the institution that takes over is going to be huge. However I guess there's the prestige of it so it may be that somebody such as maybe Reuters, perhaps Bloomberg, somebody like that comes forward, but this is going is to be a long process, there's going to be a tender process, it's going to be overseen, so it'll be a while before we know who it is." As the reforms get underway, there will be more crackdowns on the banks that submitted rates. Royal Bank of Scotland is expected to be the next to settle Libor charges - with more to follow. Joanna Partridge, Reuters

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

UK financial watchdog: Libor can be fixed

Friday, September 28, 2012 - 02:08