Huffpost Business

Libor Likely To Be Replaced By System More Closely Tied To Objective Data: Report

Posted: Updated:
A sign hangs on a branch of Barclays Bank near The London Eye, in London, Wednesday, April 24, 2013. Barclays PLC on Wednesday reported a return to profit in the first quarter, as it tries to restructure and get past recent scandals. In the three months ending March 31, Barclays made an adjusted profit after tax of 839 million pounds ($1.3 billion). That contrasted with a 589 million pound loss a year earlier and came despite a 5 percent fall in income to 7.7 billion pounds. (AP Photo/Kirsty Wig | AP

(Reuters) - A dual-track system, including survey-based lending rates along with transaction-linked indices, is likely to replace scandal-hit London interbank lending rate Libor as soon as next year, the Financial Times reported on its website on Sunday.

The new system would provide continuity for holders of $350 trillion in existing contracts that reference Libor while also paving the way for a new benchmark tied more closely to objective data, Martin Wheatley, chief executive of Britain's Financial Conduct Authority who is leading efforts to reform the benchmark, told the FT.

The proposal, however, could conflict with U.S. regulators, who want a switch from survey-based lending rates to transaction-linked indices to calculate the interest payable on corporate debt and underpin the global market in financial derivatives.

Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, told the FT that the existing system was "unsustainable" in the long run because banks were not doing enough unsecured lending to make accurate estimates.

The top U.S. regulator told a conference in London last month alternatives based on market transactions should be used and a fixed date set for scrapping the existing Libor and Euribor benchmarks that are currently based on quotes from banks.

More than a dozen banks are under investigation by authorities in Europe, Japan and the United States over suspected Libor rate rigging between 2007 and 2010 and officials, including incoming Bank of England Governor Mark Carney, are weighing up reforms to safeguard its integrity.

(Reporting by Abhirup Roy in Bangalore; Editing by Marguerita Choy)

Also on HuffPost:

Libor Scandal Timeline
Share this
Current Slide

Suggest a correction

Around the Web

Wheatley Seeks Dual-Track Libor as Gensler Says Replace Rate

US regulators urge quick Libor replacement

CFTC's Gensler says Libor 'unsustainable'

Libor may be replaced by a new system next year. FT says discussions are ...

JPMorgan's Lead Director in Focus

Pushovers in the Boardroom; Serial Bungling in the Foreclosure Settlement ...

Linking Libor To Real Data Could End Benchmark Rate's Reign