In its new paper, LIBOR Governance and Scrutiny, LIBOR's governing body - the Foreign Exchange and Money Markets Committee - and the BBA set out how this key indicator of the cost of borrowing is calculated and the procedures for scrutinising the process. BBA LIBOR is the benchmark rate set each working day, in 10 currencies and 15 maturities, for the cost of borrowing money in the London money market.
BBA Chief Executive Angela Knight said: "Since the credit crunch began, it has become clearer to all of us that LIBOR, not the Bank of England base rate, is what really governs saving and borrowing rates in the high street. It has always been relied on by the market as a reliable benchmark which is also the most transparent. It is appropriate in this global downturn to ensure the continued robustness of this pillar of our financial architecture."
The paper confirms LIBOR governance changes including the creation of two new sub-committees for rate fixing and oversight, a new three-step disciplinary procedure for rate contributors and expansion of the Foreign Exchange and Money Markets Committee to include non-contributing banks from the US and continental Europe and other rate users. The paper also sets out how the data received from contributors is scrutinised.
