Al­ter­na­tive to fi­nan­cial bench­mark urged

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM -

LON­DON — Bri­tish reg­u­la­tors sug­gest that the end is near for Li­bor, the fi­nan­cial bench­mark that was at the heart of a global mar­ket-rig­ging scan­dal.

The Fi­nan­cial Con­duct Au­thor­ity is urg­ing banks to find an al­ter­na­tive to the Lon­don In­ter­bank Of­fered Rate af­ter 2021 as a dearth of fi­nan­cial trans­ac­tions puts its rel­e­vance into ques­tion.

The rate has been steeped in scan­dal, but Fi­nan­cial Con­duct Au­thor­ity chief An­drew Bai­ley said Thurs­day that it’s the sus­tain­abil­ity of the rate that is in ques­tion “not be­cause we sus­pect fur­ther wrong­do­ing or have any ev­i­dence of such.”

Li­bor is the rate banks use to bor­row from one an­other and is used to price ser­vices such as mort­gages, bonds and con­sumer loans glob­ally. In 2012, it emerged that em­ploy­ees at sev­eral global banks had col­luded to ma­nip­u­late the rate to their own ad­van­tage. In­ves­ti­ga­tions in the U.S., Bri­tain and else­where led to fines as well as the res­ig­na­tion of Bar­clays Chief Ex­ec­u­tive Of­fi­cer Bob Di­a­mond, among others.

The Bank of Eng­land has sug­gested it be re­placed with an­other in­dex av­er­age.

Bai­ley said that hav­ing to move to an­other sys­tem af­ter 2021 would give banks enough time to adapt and “re­duce the risks and costs of a more sud­den change.”

“The plan­ning and the tran­si­tion must now be­gin,” he said in a speech in Lon­don.

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