BBA calls for extra scrutiny of LIBOR

Further enhancements to the current system for producing, checking and verifying LIBOR have been announced today by the British Bankers' Association (BBA).

In a new paper, LIBOR Governance and Scrutiny, LIBOR's governing body - the Foreign Exchange and Money Markets Committee - and the BBA set out how the figure is calculated and the procedures for scrutinising the process.

The paper outlines changes to the governance of LIBOR, including the creation of two new sub-committees for rate fixing and oversight and a new three-step disciplinary procedure for rate contributors.

Additionally it says there should be an expansion of the Foreign Exchange and Money Markets Committee to include non-contributing banks from the US and continental Europe.

"Since the credit crunch began, it has become clearer to all of us that LIBOR, not the Bank of England base rate, is what really governs saving and borrowing rates in the high street," says BBA chief executive Angela Knight.

"It has always been relied on by the market as a reliable benchmark which is also the most transparent. It is appropriate in this global downturn to ensure the continued robustness of this pillar of our financial architecture."