On September 24, the Chairman of the CFTC, Gary Gensler, addressed the European Parliament Economic and Monetary Affairs Committee about the state of LIBOR. His comments came in the wake of the LIBOR scandal, initially revealed to the public in March 2011, and in advance of the Financial Services Authority’s recommendations on the future of LIBOR.
Chairman Gensler’s remarks included a call to look at the possibility of adopting alternate rates to replace LIBOR. His reasoning alluded to many of the same problems found in the emerging allegations of improper conduct against member banks. Gensler noted the banks lack “specific controls to prevent [them] from intentionally or unintentionally herding together and reporting the same or similar rates” and that banks have “inherent conflicts of interest” when submitting their own borrowing rates.
Governmental agencies in the US have been investigating the sixteen banks that set LIBOR for the US dollar since reports of the scandal began to surface last year. British bank Barclays has already paid a settlement of over $453 million to authorities in the US and UK.