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financial stability and libor July 17, 2012

Posted by Bradley in : financial regulation , trackback

The Treasury Committee, meeting today to discuss the Bank of England’s June 2012 Financial Stability Report began by picking up where they left off yesterday with Turner asking why King was involved in the discussions with Agius about Diamond’s position at Barclays. Andrew Tyrie asked why, when the FSA was the regulator, the Bank of England was involved. Turner insisted on the legitimacy of the Bank of England’s concern with confidence in banks given the Bank’s role in providing liquidity support to banks. And he said the FSA was not taking the position as the regulator that Diamond was not fit and proper (it was not a formal direction). Tyrie expressed some concern for the future that the position of chief executives of banks should not hang on the whim of some future Governor of the Bank of England.

On the issue about whether the Bank encouraged lowering of Libor quotes, there are some newly released emails. And Tucker was in the hot seat over this issue again.

When central bankers meet at Basel every couple of months there is a smaller group of major countries that meets, King says, in the context of questions about his interactions with Geithner over Libor governance.

Meanwhile there are news stories about other competitors to Libor based on actual transactions, for example the DTCC GCF Repo Index and AFMA’s bank bill swap reference rates. Ben Bernanke, giving evidence to the Senate Committee on Banking, Housing and Urban Affairs, commented unfavourably on the lack of responsiveness of Libor to the US suggestions for governance changes and suggested that transaction based measures of interest rates were preferable.


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