The scandal of banks having manipulated the Libor global interest rate benchmark is taking a toll on confidence in the markets, the International Monetary Fund said.
“The most serious consequence of this scandal, which is under investigation, is that it undermines the certainty and the trust that markets have in benchmarks,” said Jose Vinals, director of the IMF’s Monetary and Capital Markets Department.
“This is why it’s very important that the efforts which are currently under way and which are dealing with the regulation of financial institutions be completed... (and) that these regulations are implemented without delay,” Vinals told a press conference.
Major banks are under investigation in the US, Britain, Canada, Japan, the European Union and elsewhere for having allegedly rigged the setting of Libor and other essential interbank lending rate averages, which are used as key referents for commercial and retail interest rates in business around the world.
Barclays Bank has already been fined $452 million by US and British regulators for fixing Libor, and at least in the US a number of lawsuits have been filed over claimed losses tied to the rate fixing.
In a related development, a report commissioned by the G20 group of the world’s biggest economies warned that oil prices could be vulnerable to a Libor-style rigging scandal.
According to the International Organization of Securities Commissions (IOSCO), the current system of oil price reporting is “susceptible to manipulation or distortion.”
Benchmark prices are compiled by price reporting agencies. The biggest, Platts, says “there is absolutely no similarity” between Libor and oil.
Libor scandal undermines market confidence
