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With the U.S. economy showing signs of a fledgling recovery, some now question whether it makes sense to enmesh the loan rates of U.S. homeowners and small businesses with the ill health of European financial institutions and governments.
May 25
Multiple U.S. and European banks have been contacted by U.S. regulators as part of a probe into possible manipulation of the London interbank offered rate, a key global benchmark, according to people familiar with the situation.
Swiss bank UBS AG, one of 20 banks that provide daily borrowing costs to establish Libor, said Tuesday in its annual report that it had received subpoenas from U.S. regulators that are investigating whether the bank has manipulated Libor.
A spokeswoman declined comment.
Libor is supposed to reflect the average rate at which banks lend to each other. The rate, which is compiled across a number of currencies and time periods, is used to set interest rates on home mortgages and corporate loans.
Banks that serve on the Libor panel submit their borrowing costs and the results are published in London every day around lunchtime.
The bottom and top quartiles of the costs submitted are trimmed from the Libor calculation. That process would make it difficult for just one bank to manipulate Libor.
The British Bankers' Association, which oversees Libor, said in a statement it is committed to maintaining Libor's integrity. "It is fully transparent — all of the data inputted by the contributor banks is publicly available, as is our methodology. And all decisions regarding the design and governance of the benchmark are taken in full consultation with market participants."
