金利不正操作 市場の信頼回復へ改革を急げ

The Yomiuri Shimbun (Jul. 22, 2012)
Reform urged to regain trust of market amid Libor scandal
金利不正操作 市場の信頼回復へ改革を急げ(7月21日付・読売社説)

Distrust in financial markets has been heightened recently by suspected rigging in Britain of the world's most highly cited benchmark interest rate. Financial authorities must dig up the whole truth of the rate manipulation scandal to work out thorough measures to prevent a recurrence of the problem.

We refer, of course, to the rate-fixing scandal involving the London Interbank Offered Rate, better known as Libor.

Libor is calculated on the basis of unregulated estimates of rates that major commercial banks operating in London--from Europe, the United States and elsewhere--submit to the British Bankers' Association, regarding costs the banks incur when borrowing from each other.

Libor is widely used as a benchmark in connection with rates for corporate loans, derivatives contracts and many other financial deals around the world. Financial transactions tied to Libor are said to be worth an estimated 360 trillion dollars globally.

Such an important benchmark rate has been revealed to have been distorted by false submissions from Barclays, one of Britain's top banking groups. Barclays has paid a huge fine over the irregularities, and its false reporting was a clear betrayal of investors' trust.

The wrongdoing is said to have been conducted from 2005 to 2009.


Not altered single-handedly

It seems the bank initially submitted artificially high rates to manipulate Libor levels upward to shore up its own profits.

But from around 2008, Barclays submitted deliberately low rates, in the midst of the 2007-2009 financial crisis marked by the collapse of U.S. investment bank Lehman Brothers. The manipulation was apparently a bid to bolster its bottom line by giving the impression that the bank could borrow money more cheaply and was thus healthier than it really was, so as to maintain its credibility even while being shaken by the crisis.

No one banking institution can single-handedly alter the calculations behind the Libor rate. There have been suspicions that banks other than Barclays may have conspired to rig Libor submissions. Suspicion has also arisen that an executive of the Bank of England, Britain's central bank, may have pressured Barclays to engage in the rate manipulation.

Under the circumstances, it is only natural that Britain's financial regulatory authorities have embarked on full-scale investigations into the matter, questioning a number of U.S. and European financial institutions. The regulatory authorities should plunge their investigative scalpel into the dark side of the financial world.

The conduct of not only British regulators but also of financial regulatory authorities of the United States has been brought into question.

U.S. Treasury Secretary Timothy Geithner, while heading the New York Federal Reserve Bank in 2008, obtained information concerning Libor manipulation and offered the head of Britain's central bank a proposal on how to "eliminate the incentive to misreport." Authorities in both Britain and the United States, however, eventually left the problem unaddressed. Their response to the problem was inadequate.


Collective suits looming

Taking such things into account, Federal Reserve Chairman Ben Bernanke, in testimony to a U.S. congressional committee earlier this week, stated the Libor system should be considered "structurally flawed."

To ascertain whether submissions by banks are proper, stronger supervision is a must.

Steps that must urgently be taken include increasing the number of banks making Libor submissions to enhance the transparency and trustworthiness of the critical benchmark.

It is possible that false Libor reports by banks other than Barclays may be exposed and collective lawsuits may be filed by investors and others over losses they suffered because of the Libor manipulation. We hope that market upheaval due to the scandal can be prevented from spreading.

For Japan, this is no fire on the other side of the river.

The Japanese Bankers Association has decided to beef up its inspections of submissions from banks for the Tokyo Interbank Offered Rate, or Tibor, which has become known as the Japanese version of Libor.

Ceaseless efforts by the association and its member banks are essential for dispelling investors' mistrust over the benchmark rates.

(From The Yomiuri Shimbun, July 21, 2012)
(2012年7月21日01時20分 読売新聞)

by kiyoshimat | 2012-07-23 10:14 | 英字新聞

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