According to the press release, NYSE Euronext, the U.S. company running the New York Stock Exchange will take over and administrate the Libor interbank interest rate.
The British Banker's Association will devolve its power to the new manager in early 2014. It is worth noting that in autumn, Head of the Financial Services authority Martin Wheatley suggested depriving the BBA from rights to run Libor and assigning a new governor.
The mechanism of determining the interest rate will not be changed fundamentally – banks will present the administer all the information about interest rates, which allow the financial institutions, in their opinion, to borrow money from each other, The Financial Times said. Nevertheless, in the early stages NYSE is planning to get periodic consultations with regulators and market participants in order to set an adequate interest rate. The NYSE department, which will be put in charge of rate defining, will be kept under control of the British regulators.
Among NYSE Euronext contestants were Bloomberg, the British financial information provider Markit, and London Stock Exchange. The FRS decision was provoked by the rate manipulating scandal. First suspicions concerning that Libor figures do not match the real situation on the interbank lending market aroused in 2008. In 2011, the American authorities brought a corresponding investigation, lately to which joined the European inspectors.
In compliance with the investigation, bankers reported wrong data to the BBA by way of not announcing their difficulties with capital attracting. All in all, the Libor figures, which tied to contracts totaling $300 trillion, were distorted. Currently, three banks such as Barclays, UBS, and RBS have paid about $2.5 billion after admitting the collusion to manipulate the benchmark. The investigation against several financial institutions has not been underway yet.
