U.K. regulators have spearheaded efforts to reform the key interest rate that affects mortgage and credit card rates and municipal debt prices. Barclays paid more than $450 million to British and U.S. regulators for its alleged participation in the rate-rigging scandal, The Wall Street Journal reports.
U.K. regulators have called for the replacement of the British Bankers’ Association, which established the rate in 1986, with a new administrator to oversee the rate-setting. The BBA supports the proposed changes, which were suggested by Martin Wheatley, the U.K.’s top regulator.
American regulators are examining the potential implications of changes to Libor. Some legislators have suggested the creation of a U.S.-based rate index, while other officials are in the process of examining other survey-based rate-setting systems and potential corrections to Libor.
Alastair Fitzpayne, the assistant secretary for legislative affairs at the U.S. Treasury, said that regulators are assessing “the potential financial impact of a transition to a new benchmark,” according to The Wall Street Journal.
Libor is calculated every day using estimates submitted by banks of the rates at which they could borrow from other banks. Using each bank’s assessment of risk in rapidly changing markets, the BBA calculates the daily rate.