Mid.EastNEWS - LONDON (AP) The company behind the New
York Stock Exchange will take over running and restoring confidence in the
scandal-hit London interbank offered rate, or LIBOR, a UK committee has ruled.
The independent
panel, set up by the UK government following revelations last year that the
rate had been manipulated, chose NYSE Euronext to take over LIBOR from the
British Bankers' Association, which had supervised the rate-setting for
decades.
The changeover is
scheduled to be completed by early 2014, the panel said in a statement. It did
not identify any other bidders. "This change will play a vital role in
restoring the international credibility of LIBOR," the panel's chair,
Baroness Sarah Hogg, said in a statement.
LIBOR underpins
trillions of dollars of transactions all over the world. It is an average rate
that measures how much banks expect to pay each other for loans and is also
used in calculating borrowing costs of hundreds of trillions of dollars in
loans and investments such as bonds, auto loans and derivatives.
But the setting of
LIBOR was underpinned on trust. The scandal emerged when authorities realized
banks - including Royal Bank of Scotland, Barclays and UBS - were submitting
false data to gain market advantages.
U.S. and U.K.
regulators fined RBS more than $460 million for rate-rigging. Barclays' role
led to a $453 million fine and the resignation of chief executive, Bob Diamond.
Swiss bank UBS was fined $1.5 billion.
After the scandal
erupted, the government moved to restore confidence in LIBOR's integrity,
establishing the panel to review the rate and creating criminal penalties for
those who violate the rules. "We want to protect taxpayers and restore
faith in financial services," financial secretary to the UK Treasury Greg
Clark said in a statement.
The decision to
award the tender to a U.S.-based organization will help restore the credibility
of Libor, said Mark Taylor, dean of the Warwick Business School and a former
managing director of the investment firm, BlackRock.
Taylor said that
since much of the criticism of how LIBOR was managed came out of the U.S.,
having a respected player such as NYSE Euronext take charge will help restore
confidence among investors, showing that it is "squeaky clean."
But British
officials expect further reforms to come as part of the package - such as the
documentation of transactions and submissions that are revealed well after the
fact. Creating a paper trial will make it harder to manipulate the rate -
despite the temptation to do so, Taylor said.
"What it
means is that they will get as close as possible to saying what the true market
rate is," Taylor said. The rate will be administered by NYSE Euronext Rate
Administration Limited, a new subsidiary of NYSE Euronext. The new company will
be based in the UK and will be regulated in Britain by the Financial Conduct
Authority. The global exchange said it is uniquely placed to restore the
international standing of LIBOR.
In a statement, the NYSE Euronext said the new
division will be able to use the group's "trusted brand, long regulatory
experience and market-leading technical ability to return confidence to the
administration of LIBOR."
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