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Following the scandal, Libor to come under supervision of EU Paris-based regulator

Friday, June 7th 2013 - 07:52 UTC
Full article 15 comments
The draft was introduced by EU Commissioner Michel Barnier but so far “hasn't got political validation and is subject to change” The draft was introduced by EU Commissioner Michel Barnier but so far “hasn't got political validation and is subject to change”

European authorities are to propose bringing control of the inter-bank lending rate, Libor, under the supervision of a Paris-based regulator. The draft regulation proposes moving oversight of the scandal-hit benchmark from London to the European Securities and Markets Authority (ESMA).

Libor is used to price trillions of pounds worth of financial contracts, including loans and mortgages. A UK Treasury source said the government was “relaxed” about the plans.

The wide-ranging European Commission proposal, due to be published in the summer would see financial markets regulator ESMA overseeing and authorising a raft of key financial benchmarks at a European level, including Libor.

It aims to establish “particular rules of good governance to ensure greater transparency, manage conflicts of interest and to ensure the representative ness of the benchmarks”.

A Commission official said: “As Libor is a global benchmark, and it's used throughout the EU in contracts, it makes sense for the supervision to reflect that reality and thus have a European dimension, and responsibility for the relevant European supervisory body.”

However, the official stressed the draft, introduced by EU Commissioner Michel Barnier, “hasn't got political validation and is subject to change”.

Libor - the London Inter-bank Offered Rate - is currently set in London and is meant to reflect the average rate that banks pay to lend to each other.

It is used to benchmark everything from car loans and mortgages to complex financial transactions around the world. It is currently set each day by the British Bankers' Association based on estimates received from 16 major international banks in London of how much they must pay in order to borrow cash from other banks.

The Libor scandal emerged in June last year when UK and US authorities fined Barclays £290m for fixing the key inter-bank interest rate. Since then, Swiss bank UBS and Royal Bank of Scotland have been given fines of £940m and £390m, respectively.

The Treasury source said the UK government was relaxed about the plans, which are a “recognition that this is a global problem”.

“In terms of Libor, the issue of who overseas it has only arisen because the UK has shown leadership in taking quick action to reform Libor,” he said.

The government is expecting to announce a new administrator of Libor over the summer and has already introduced reforms, such as making it illegal to manipulate benchmark rates.

Libor evolved based on trust and was entirely unregulated, so when corruption crept in there were no safeguards. As the scandal broke it became clear that traders at several banks conspired to influence Libor by asking colleagues to submit rates that were either higher or lower than their actual estimate.
 

Categories: Economy, Politics, International.

Top Comments

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  • ChrisR

    It is called the London Inter-bank Offered Rate and for good reason.

    France is now positioned financially worse off than the UK in the 1970's, in fact as bad as when the UK were under IMF orders due to the cunts in the Labour Party and their 'mates' the unions fucking the economy up, just like Blair and the cunt Brown:
    http://www.telegraph.co.uk/finance/financialcrisis/10093809/France-worse-off-than-UK-in-the-1970s-Axa-chief.html

    So they must be perfect for the PIBOR!

    Can't see it happening though.

    Jun 07th, 2013 - 12:20 pm 0
  • Conqueror

    Of course they are. Incidentally, that's not “European” authorities, it's “Franco-German” authorities. And why would they do this? It's not as though the French know anything about money. Once you've gone through wine, cheese and shagging anyone who'll stand still long enough, you've just about exhausted their potential!

    Jun 07th, 2013 - 02:04 pm 0
  • TroLLey_to_Truth

    HAHAHAHAHAHAHAHA.

    London under the supervision of Paris. Fitting to rub it on the wound of the Brits.

    Jun 07th, 2013 - 02:09 pm 0
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