Announcement of LIBOR changes
12 Jun 2013
BBA LIBOR today announced that following the recommendations set out in the Wheatley Review, with effect from 1st July 2013, the publication of individual bank’s submissions to LIBOR will be embargoed for 3 months. The BBA also announced today that the publication of “same day” EURO LIBOR rates for 1 week and 1 month, will cease from 31st July 2013. These 2 rates were supplemental to the “spot” EUR LIBOR rates for all seven LIBOR tenors, which will continue as usual.
Individual bank submissions will remain available in real-time to the LIBOR benchmark administrators for the purposes of calculating the rate and for monitoring and surveillance. The information will also remain available to the FCA for the purpose of supervision.
Individual submissions will be published after a period of 3 months. The daily publication of the final LIBOR rates will not be affected.
Commenting on this announcement Anthony Browne, Chief Executive of the British Bankers’ Association said:
“Restoring confidence in Libor as a reliable benchmark is an absolute priority for the BBA and we have been working hard with regulatory authorities and the Government to put in place the necessary reforms ahead of it transferring to a new owner.
“We are enacting the reforms as set out by Martin Wheatley in his review of LIBOR and this is another important milestone in that process.”
Martin Wheatley said:
“I welcome this further step towards implementing the conclusions of the Wheatley Review.”
For more information please contact the BBA press office on 0207 216 8989.
Notes to editors:
- A copy of the full announcement made by BBA LIBOR is available below.
- The Wheatley Review, published in September 2012 looked at the structure and governance of LIBOR and made recommendations on how the system should be reformed. A full copy of the report is available at http://cdn.hm-treasury.gov.uk/wheatley_review_libor_finalreport_280912.pdf
- Recommendation 7 of the Wheatley Review states that:
“The BBA should publish individual LIBOR submissions after 3 months to reduce the potential for submitters to attempt manipulation, and to reduce any potential interpretation of submissions as a signal of creditworthiness.”
- Full details of the Wheatley Reports findings on this issue are set out on pages 37–38 of the Wheatley Review, and are set out below in full:
Delaying publication of individual submissions
5.14 Up until now, the LIBOR submissions of individual contributors have been published daily, alongside the final LIBOR rate. This publication was originally intended as a mechanism to promote transparency and public accountability for the accuracy of submissions.
5.15 However the discussion paper highlighted a concern that the publication of individual submissions could facilitate the manipulation of the rate and create incentives for contributors to submit inappropriate rates. In particular:
- the submissions provide information to contributors that may facilitate manipulation since contributors can, assuming that other contributions do not change significantly from day-to-day, estimate the likely impact of their submission on the overall rate; and
- while individual submissions reflect elements other than solely idiosyncratic counterparty credit risk, changes in a particular bank’s submission may be interpreted by some observers as an implicit signal as to the creditworthiness of that contributor. Real-time publication of submissions can create incentives to submit a lower rate than would otherwise have been submitted.
5.16 The Review considers that these considerations outweigh the merits of making this information public in real-time. Therefore, the Review recommends that the publication of individual submissions be delayed by a period of at least 3 months.
5.17 Individual submissions will remain available to the rate administrator and if necessary any relevant oversight committees in real-time, for the purpose of calculating the rate and facilitating corroboration and monitoring techniques. The information will also remain available to the FSA for the purpose of supervision and market monitoring.
- Since the Wheatley Review was published in September 2012, the BBA and BBA LIBOR Ltd have been fully supportive of all its recommendations, and committed to implementing those recommendations which are under their control. This has involved consulting on streamlining the number of LIBOR currencies and maturities so that instead of the LIBOR rates for ten currencies and 15 maturities at the time of the review (150 rates), only five currencies and seven maturities are now quoted every day (35 rates). We have successfully terminated the Danish, Swedish, Canadian, Australian and New Zealand LIBOR rates, without disruption to financial markets.