G20 task force to study Libor reform

Tue Jun 25, 2013 6:05am EDT
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By Emma Thomasson

BASEL, Switzerland (Reuters) - The agency that sets rules for global banks will establish a task force to look at reform of Libor after a scandal in which three banks were fined for rigging the global interest rate benchmark.

The Financial Stability Board, set up by the G20, will report back next year on whether the benchmark should be changed and over what period, its chairman, soon-to-be Bank of England governor Mark Carney said on Tuesday.

It will draw on a report based on new international standards expected next month from the IOSCO group of securities regulators.

"What has to be taken into account is the robustness of the standard," Carney told a news conference after an FSB meeting. "We have to recognize that even some transactions benchmarks could be manipulated, it depends on depth of the market."

Libor, or the London Interbank Offered Rate, is a benchmark for lending rates between banks that is used as the basis for many other rates and to help price products worth over $300 trillion. It is based on quotes from banks.

The U.S. Commodity Futures Trading Commission wants Libor scrapped and replaced with a reference rate based on actual market transactions.

Martin Wheatley, chief executive of the UK's Financial Conduct Authority who will co-chair the FSB group, says rapid transition to a transaction only rate is not possible.

The FSB steering group, which will also be co-chaired by Jeremy Stein, a governor of the U.S. Federal Reserve Board, will consider ease of transition and transition costs.   Continued...

Mark Carney, Bank of Canada Governor and chairman of the Financial Stability Board speaks during a news conference after a Financial Stability Board plenary meeting in Zurich, January 28, 2013. REUTERS/Michael Buholzer