Friday, October 17, 2008

Is this part of the "Problem"?

"Libor is set by a panel of banks in a daily survey by the British Bankers' Association at about noon in London. Members provide estimates on how much it would cost to borrow in 10 currencies for terms from a day to a year. The Bank for International Settlements said in March some lenders may have ``manipulated'' rates to keep from appearing like they were in financial straits. " http://www.bloomberg.com/apps/news?pid=20601087&sid=a_MW4IciV.rc&refer=home ( Bloomberg.com )

I can remember when the gold price was set by a group of London dealers, and I wonder if we're seeing a relic from time gone by?
Why isn't the LIBOR rate ( London Interback Offered Rate ) set by the free market?

Don't forget that today is an options expiration day and things could be nuts on the trading floors, as if they haven't been lately.

1 comment:

Brian Mairs said...

British Bankers' Association here. Thanks for putting up this posting. LIBOR is set by the market: it is a benchmark calculated from rates submitted by 16 banks. We throw out the top and bottom four rates and average the middle eight to arrive at the benchmark. All the banks' daily submissions can be viewed on Reuters, Bloomberg and other news services so any anomalous postings would be spotted quickly.

And the Internaitonal Monetary Fund last week wrote that LIBOR continues to be a reliable and accurate benchmark of the market. Bit more recent than those BIS criticisms Bloomberg wrote about.