Brussels-based interest rate index Euribor and its beleaguered London counterpart Libor are subject to antitrust investigations by the European Commission to examine whether there was collusion amongst member banks in an attempt to rig rates. The results are not expected before the end of the year.
Barclays Bank was fined €373 million in June in separate UK proceedings after admitting that it attempted to manipulate the Libor and Euribor rates between 2005 and 2009.
"It is essential that steps are taken to ensure the integrity of benchmarks and the benchmark-setting process,” said Michel Barnier, commissioner for Internal Market and Services, claiming that the Libor scandal “revealed yet another example of unacceptable behaviour by banks”.
In July the Commission tabled measures to criminalise index fixing, with new rules set to be introduced by 2015. Yesterday’s consultation will pave the way for a possible overhaul of the regulation of indexes and almost certainly heralds the end of self-regulation, a hands-off approach which led to a culture of index manipulation in the case of Libor.
In the consultation – which takes the form of a questionnaire, and will close on 15 November – the risk of granting too much freedom to the compilers of indexes is highlighted. The consultation covers all benchmarks, including commodities and real estate price indices, rather than limiting itself to interest rate benchmarks.
End of self-regulation
The paper comprises five chapters covering the scope, governance and purpose of such indices and benchmarks; comparisons between those provided by private and public bodies; and the impact of potential regulation.
"The integrity of indices is vulnerable whenever discretion is exercised," it says, adding: "If an index is based on actual transaction or other verifiable data, the contributor of the data does not generally need to exercise discretion."
It will almost certainly result in tighter regulation, which would be subject to a proposal to be tabled in due course by the Commission. Such regulation, when introduced, would be subject to enforcement by national financial supervisory authorities within the member states.