Britain will hand over administration of the London interbank offered rate to the operator of the New York Stock Exchange as regulators try to revive confidence in the scandal-hit benchmark.
NYSE Euronext will replace the British Bankers’ Association as LIBOR’s administrator in early 2014, the London-based lobby group that started the benchmark more than two decades ago said in a statement Tuesday.
The U.K.’s Financial Conduct Authority began regulating LIBOR, the benchmark for more than $300 trillion of securities, in April as part of the overhaul. A government review recommended last year that the BBA should be stripped of responsibility for LIBOR after regulators found banks had tried to manipulate it to profit from bets on derivatives.
The New York-based NYSE Euronext already operates Liffe, Europe’s second-largest derivatives exchange, which offers derivatives based on LIBOR.
“The fact they are handing this to a derivatives exchange is a surprise,” Peter Lenardos, a financials and exchange analyst at RBC Capital Markets in London, said by telephone Tuesday. “It just doesn’t seem independent enough. They are taking the setting of LIBOR from the banks and giving it to an exchange not known as a benchmark provider.”
Barclays, UBS and Royal Bank of Scotland Group have been fined more than $2.5 billion by U.S. and U.K. regulators for rate-rigging, and more than a dozen more firms are being probed worldwide.
The U.K. government formally started the search for a replacement body to set LIBOR in February after the BBA formally voted to relinquish operation of the benchmark. A seven-member panel including Sarah Hogg, outgoing chairman of the Financial Reporting Council, FCA Chief Executive Officer Martin Wheatley, and the Bank of England’s Paul Fisher recommended the new administrator.
“This change will play a vital role in restoring the international credibility of LIBOR,” Ms. Hogg said in a statement. NYSE Euronext Rate Administration will be a U.K.-based company, and will be regulated in the U.K. by the FCA.