British Bankers’ Association issues new paper, LIBOR Governance and Scrutiny, and indicates further enhancements to the current system for producing, checking and verifying the global interest rate benchmark.
In new research, LIBOR Governance and Scrutiny, LIBOR’s governing body – the Foreign Exchange and Money Markets Committee – and the BBA set out how this key indicator of the cost of borrowing is calculated and the procedures for scrutinising the process. BBA LIBOR is the benchmark rate set each working day, in 10 currencies and 15 maturities, for the cost of borrowing money in the London money market.
The paper also touches the way data received from contributors is scrutinised. Among LIBOR governance changes confirmed by the report are: the creation of two new sub-committees for rate fixing and oversight, a new three-step disciplinary procedure for rate contributors and expansion of the Foreign Exchange and Money Markets Committee to include non-contributing banks from the US and continental Europe and other rate users.
“Since the credit crunch began, it has become clearer to all of us that LIBOR, not the Bank of England base rate, is what really governs saving and borrowing rates in the high street,” says Angela Knight, chief executive, BBA. “It has always been relied on by the market as a reliable benchmark which is also the most transparent. It is appropriate in this global downturn to ensure the continued robustness of this pillar of our financial architecture.”
L.D.