FINANCIAL TIMES: ….The UK review is meant to finish this autumn, in time for the recommendations to be included in a financial regulation reform bill moving through parliament. Mr Barnier fixed no deadline and is alive to the complex problems these reforms must address.
Both reviews will consider to what extent Libor and other indices – which are used to price everything from certain commodities and shipping charges to interest rates – should be based on actual transactions against estimates from participating institutions.
While most market participants would prefer market-based rates, in some illiquid markets there simply are not enough transactions to provide a daily or weekly rate. Libor was set up in the 1980s as an average of estimates precisely because there was no easy way to calculate a market-based rate for unsecured interbank lending. … (more)
