Thomson Reuters loses joint bid to run tainted bank rate

An independent committee set up by the British government awarded the contract to transatlantic exchanges operator NYSE Euronext. By early next year it will take over the administration of the London Interbank Offered Rate from the British Bankers’ Association, a London-based trade group whose members are some of the world’s biggest banks. BBA has run LIBOR since the 1980s. Reuters has helped the BBA to calculate the rate and distribute it since 2005.

The new administrators will be charged with restoring confidence and credibility in the rate after a global investigation that has seen three banks – Barclays, UBS and RBS – pay British and US regulators more than $2.5 billion in fines for rigging the rate in order to make money on derivatives. Two men have been charged with manipulating LIBOR and similar benchmark rates. More banks and individuals remain under investigation.

LIBOR will continue to be calculated by surveying a panel of banks about the rates at which they think they can borrow, at least initially. But the new administrator is expected to consult regulators and market participants to come up with ways to link LIBOR more closely to real transactions without upsetting existing financial contracts worth more than $550 trillion.

Analysts told the Financial Times that the LSE, the leading UK contender, may have hurt its chances by putting forward a joint bid with Thomson Reuters, which was involved in setting the rate during the scandal period.

Thomson Reuters said it would continue as calculator and distributor of LIBOR unless NYSE Euronext decides otherwise. ■