Recently LIBOR has come under the spotlight as an accurate barometer of the credit crunch, as it follows the rates at which banks perceive borrowing risk in the markets. But as the credit crunch led to stress in the markets, it also stressed this benchmark.
The changes announced are:
• tighter scrutiny of the rates contributed by banks into the setting mechanism, so that any discrepancies in the rates must be justified by individual contributing banks;
• wider membership of the Foreign Exchange and Money Markets Committee, the independent body which oversees the process; and
• increasing the numbers of contributors to some of the rate-setting panels.
BBA chief executive Angela Knight said: "BBA LIBOR has stood the test of time: it has been published on every business day since 1985 and is among the most transparent indices in the world. These changes will further strengthen BBA LIBOR and the confidence of its many users."
