British Bankers' Association Relinquishes Oversight Of Libor In Preemptive Move

Wednesday, September 26, 2012 08:08
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British Bankers' Association Relinquishes Oversight Of Libor In Preemptive Move

Tags: fraud | global investing | regulation

The British Bankers’ Association (BBA) will no longer be the governing body for Libor. Libor has been dubbed the world’s most important number but it is a number that has proved unreliable as far back as 2008.

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One lawsuit from the scandal has unearthed instant messages that prove the Royal Bank of Scotland (RBS) had the ability to manipulate the rate to be more favorable for the bank. An RBS employee says he was wrongly dismissed for allegedly fixing the rate.
 
Discussions from those messages shows the vulnerability of the rate to abuse.
 
Government officials and global regulators have been pushing to restructure Libor. The manipulation scandal involves at least a dozen international banks, some of whom have reached settlements and subsequently fired bank chairs and CEOs.
 
The vote by the BBA’s council to relinquish oversight is preemptive of expectations that the UK’s Financial Services Authority (FSA) would recommend stripping the BBA of its authority.
 
There is no entity next in line for oversight. The BBA had sought to pass the oversight burden to other entities as early as 2008. Regulators at the FSA and the US Federal Reserve were asked to help oversee the rate but they feared the perception that they
were endorsing the rate.
 
BBA executives then pondered selling off the Libor unit to exonerate themselves from what was already becoming a controversial situation during the 2008 – 2009 timeframe.
 
But the unit generated good revenue for the bank during a time of global financial crisis, so it kept the unit. The suit against RBS says that a cartel had arisen around fixing the Libor rate.
 

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