Not having a great day.
Remember when the new people in charge of Libor—you know, the ones doing such a good job of running their flagship exchange yesterday—said that no one wanted to help set it but there was really nothing to worry about because all of their hard work, combined with a new oversight committee, was “encouraging new participation and confidence” in the benchmark? Yeah, not so much.
A top U.K. regulator says efforts to overhaul the London interbank offered rate, or Libor, haven't gone nearly far enough. The U.S. Federal Reserve says Libor is no longer fit to serve as the market’s main benchmark….ICE has committed to publishing new proposals for Libor reform this summer. Martin Wheatley, chief executive of the U.K. Financial Conduct Authority, said the benchmark needs a full overhaul, that “changes the definition” of Libor.
Or it could just not bother and scrap the whole thing.
Changes to regulation in the aftermath of the financial crisis have reduced the amount of lending between banks and “weakened the foundation of Libor,” said Jerome Powell, a governor of the Federal Reserve, in a speech last fall. Banks are now more likely to borrow cheaply by offering assets such as government bonds as security to investors in return for short-term loans.
“Is it wise to rely on a critical benchmark that is built on a market in decline?” asked Mr. Powell. “Clearly not. The risks to market functioning are simply too great.”