The US owner of the New York Stock Exchange announced yesterday it will take over the running of Libor, the benchmark interest rate at the center of a global rigging scandal, in a move that Britain’s financial regulator said would restore its integrity.
A central cog in the world financial system, Libor rates are used as a reference for some $550 trillion in contracts, ranging from complex derivatives to everyday credit-card bills. Trust in the London interbank offered rate (Libor) was shaken by revelations last year that traders had routinely manipulated it, prompting an overhaul of the system by which it is calculated.
NYSE Euronext will take over Libor from the British Bankers’ Association (BBA) for a token 1 pound ($1.50), according to a source who declined to be identified because the contract details are confidential. The BBA, a trade body, had since the 1980s administered the rate, which reflects what banks say they are charged to borrow by other banks.