Secret Libor Committee Clings to Anonymity Following Scandal
Every two months, representatives from the world’s largest banks meet at an undisclosed location to review the London interbank offered rate.
Who sits on the British Bankers’ Association’s Foreign Exchange and Money Markets Committee, the body that governs the benchmark for more than $300 trillion of securities worldwide, is a secret. No minutes are published. The BBA won’t identify any members, saying it wants to protect them from being lobbied, and declined to make the chairman available for interview.
The group’s lack of transparency is symptomatic of a self- regulated system that failed to stop traders around the world manipulating the world’s most widely used benchmark interest rate for profit. Martin Wheatley, the British regulator charged with reviewing Libor after the scandal, is now weighing whether to bring oversight under the control of regulators.
“Politically something has to fundamentally change in the way that Libor is run,” said Owen Watkins, a former regulator at the U.K. Financial Services Authority and now a lawyer at Lewis Silkin LLP in London. “The obvious way to change it is to have regulators more involved than they were in the past.”
The group has sole responsibility for all aspects of the functioning and development of Libor, according to the BBA. Its functions include the design of the benchmark, which banks sit on the panels that determine the rate, and scrutiny of all rates submitted.