By Rebecca Burn-Callander Thursday, 13 December 2012

Thomson Reuters throws hat in the Libor ring

While financial regulators um and ahh over whether Libor - in any form - will remain the industry choice for setting global interest rates, Thomson Reuters asks to be considered for its future administration.

So, the Financial Services Authority wants the future administration of the London interbank offered rate to be operated by an independent organisation, rather than the British Bankers' Association trade body, which currently oversees the rate. MT was hoping for an Andrew Lloyd Webber TV extravaganza, with a host of financially-astute suitors singing their hearts out for the role of ‘Libor enforcer’. But it looks like the whole thing will be sorted out the old-fashioned way: through a series of regulatory committees.

Bloomberg is already in the running for the post, and now Thomson Reuters has also asked to run the proposed ‘toughened up’ new system that may emerge from the ashes of the rate-rigging scandal. It’s a fairly strong candidate for the role, given that the data provider already calculates and distributes the Libor rates on behalf of the BBA.

Thomson Reuters has emerged pretty unscathed from the whole affair. Indeed, the Bank of England and the FSA have already issued assurances that the group will not be investigated; it was an innocent bystander during the Libor rigging, they conclude.

But the bigger question is this: will Libor continue to exist at all? The concept of a fixed, daily interbank lending rate is rather archaic in a digital age of real-time financial updates and high-tech reporting tools. Still, the banking industry isn’t exactly a ‘early adopter’ in terms of technology, and with Libor underpinning the terms of some $350tn of contracts, from corporate lending to lowly mortgages, it’s not surprising that Thomson Reuters wants to keep its hand in.

It is not yet known when a decision on the Libor issue will be made. At the moment, the regulators are a little busy rounding up the rate-riggers. The Serious Fraud Office and police recently arrested three British men over alleged wrongdoing. Tom Hayes, a former trader at UBS and Citigroup, and two brokers from RP Martin, Jim Gilmour and Terry Farr have been questioned over the scandal.

Until the FSA can prove that justice has been meted out, the question of who will run Libor will have to take a back seat. Still, Thomson Reuters has been smart to get in there quickly. Early birds and all that….

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