This content is not available in your region

Europe moves to stop benchmark rigging after Libor scandal

Europe moves to stop benchmark rigging after Libor scandal
Text size Aa Aa

European Union regulators are putting forward new rules to stop the rigging of benchmarks for interest rates and commodity prices.

That was in response to the scandal involving banks distorting the information provided for the London Interbank Offered Rate.

That benchmark – known as Libor – is used to set the interest rates for home loans and credit cards around the world.

The rules will also cover commodity benchmarks for things like crude oil prices.

EU Internal Market Commissioner Michel Barnier explained: “What we are proposing is establishing rules of good governance to ensure transparency, to manage the inherent conflicts of interest in these benchmarks, and ensure the quality and credibility of the benchmarks. There is a framework of regulations for supervision and provision for sanctions.”

Benchmarks would be regulated for the first time at the European level, but enforced by individual countries’ authorities.

Commenting on that Barnier said: “It’s not weak supervision that I’m proposing. I put my confidence in these British or Belgian supervisors to do their jobs.”

The regulators abandoned the idea of much broader oversight by Brussels following objections from the commodities industry and Britain, the region’s largest financial centre.

London’s main financial community said it was largely happy with the proposals although commodity traders said their business should be exempt from any Brussels oversight.

Traders, who for decades have relied on an all-but unregulated system of contributing information to guide prices for oil and other valuable commodities, say the rules would discourage market participants from submitting their prices.

The European Parliament and EU member states will have to approve the draft before it become law and could toughen up, scrap or water down any part of it.