BBA Decides Against Changing LIBOR

The British Bankers’ Association has just announced that it has wrapped up its review of the composition of its London Interbank Offered Rate Contributor Panels, but contrary to heavy media speculation that changes would be made to LIBOR, the BBA did not alter a thing. The review commenced in April. The last changes to LIBOR were made a decade ago. The Contributor Panels are the banks that contribute to LIBOR rate-setting procedures, and under review were the panels for Australian Dollars, Canadian Dollars, Danish Krone, Euros, Japanese Yen, New Zealand Dollar, Swiss Francs, Sterling, Swedish Krona and U.S. Dollars. As documented in its news release today, the BBA noted at the end of the list of each of the 10 contributor panels that “there has been no change in the composition.” The BBA explained that the determinations on each of the banks–either eight or 16 banks for each currency, with the U.S. having 16 banks–were based on their “scale of activity in the London market, perceived expertise in the currency concerned, reputation, and due consideration of credit standing.” Widespread expectation that changes to LIBOR would be made was spurred by news that, as reported by Bloomberg, the Bank for International Settlements had intimated in March that some banks were misstating borrowing costs in an effort to prevent the perception that they may be experiencing financial difficulties. LIBOR is the interest rate established for banks borrowing from other financial institutions in London’s interbank market, and serves as a global standard of sorts for interest rates. The BBA announced today that it is dedicated to reviewing panels at least once a year.