LONDON (Reuters) - Facing growing criticism over the credibility of the LIBOR reference rate in the wake of the credit crunch, the British Bankers Association said on Wednesday it had brought forward a review of its setting process.
The BBA also indicated it would exclude from the London Interbank Offered Rate (LIBOR) process banks that distort the market when they quote lending rates in daily market operations.
“The economic conditions are difficult, especially in the lending and credit market. In response, the BBA has brought forward the regular review of the BBA LIBOR settings process,” a spokesman said. He said the review was underway but gave no indication of when it would be completed.
“The BBA will ensure that dollar BBA LIBOR continues to be a transparent, objective, accurate rate,” he added.
Adding to growing criticism of LIBOR processes, a top executive at Credit Suisse CSGN.VX said earlier on Wednesday that the daily rate had been hit by the breakdown in funding and would survive only with “its credibility severely weakened.”
LIBOR, a daily reference rate, is based on the interest rates at which banks offer to lend unsecured funds to each other in 10 major currencies in the London interbank market.
It is a key benchmark for short term interest rates and is used as the basis for settlement of interest rate contracts on many of the world’s futures and options exchanges.
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Reporting by Clara Ferreira-Marques, editing by David Christian-Edwards