LONDON (AFP) - The British Bankers' Association (BBA) announced on Wednesday changes to how the key Libor interest rate is calculated in a bid to avoid a repeat of last year's rate-rigging scandal.
The BBA said publication of banks' individual submissions would be embargoed for three months in a move aimed at avoiding possible "manipulation of the rate". It added in a statement that the change, which follows recommendations of a review initiated by the British government, would take effect from July 1.
The Wheatley Review, published last September, had stated that the "BBA should publish individual Libor submissions after three months to reduce the potential for submitters to attempt manipulation, and to reduce any potential interpretation of submissions as a signal of creditworthiness".
The BBA said individual bank submissions would "remain available in real-time to the Libor benchmark administrators for the purposes of calculating the rate and for monitoring and surveillance".
Libor is a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money. Euribor is the euro zone equivalent.
BBA chief executive Anthony Browne 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."
The BBA is to lose its role of Libor rate-setter in the wake of the rigging crisis.
The European Commission was, meanwhile, shortly expected to present proposals to tighten up oversight of key financial market benchmarks, especially of interest rates, officials said last week.
A source close to the issue said a key element could involve moving Libor, or the London Interbank Offered Rate, from London to Paris where it would be supervised by the European Securities and Markets Authority.
Libor is calculated daily, using estimates from banks of their own interbank rates. However, the system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.
The BBA on Wednesday added that as part of the reforms, publication of same-day Libor rates for loans priced in euros lasting one week and one month will cease from July 31.
The Libor scandal erupted last year when Barclays bank was fined £290 million ($470 million, 363 million euros) by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009.
The Royal Bank of Scotland and Swiss lender UBS have since also received heavy fines over alleged rigging of Libor - a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money.
Euribor is the eurozone equivalent.
The fallout, meanwhile, risks becoming much wider, with analysts claiming that lenders could face massive lawsuits, since mortgage rates passed onto customers were influenced by Libor.
