Aug. 10 - Libor benchmark interest rates are no longer ''fit for purpose'' and must be changed or replaced according to Britain's financial regulator. Ciara Sutton reports.
"Not fit for purpose" - that's the conclusion of a government commissioned review on the Libor rate-setting system. Headed by the UK's financial regulator, the consultation has been examining how the benchmark interest rate for trillions of transactions, is calculated and regulated. The review will go to central banks with the intention of finding alternatives to the current system. The libor scandal has rocked the banking sector, with several banks hit with fines. CMC Markets analyst Michael Hewson says it's still unclear what the ultimate outcome will be. (SOUNDBITE) (English) CMC MARKETS, MICHAEL HEWSON, SAYING: "There has always been doubts about it for the past five or ten years, and what this crisis has done is it's brought this crisis to a head. So the consultation will look at alternatives, maybe a hybrid of traded rates as well as indicative rates and then by the end of next month we should have an idea of what the better alternatives are." The FSA says rates should now be pegged to market data rather than relying on submissions from banks. It's the first concrete step to reforming Libor after the rigging scandal dragged in global banks and hurt the reputation of regulators on both sides of the Atlantic. Barclays was fined 453 million dollars for manipulating rates. But the bank has had a welcomed boost from the appointment of a new chairman. City grandee David Walker will replace Marcus Agius who is stepping down. (SOUNDBITE) (English) CMC MARKETS, MICHAEL HEWSON, SAYING: "I think he's going to have his work cut out in trying to appoint a CEO and a COO, but in the short term it is a good starting point, but as a long term chairman maybe he is not the right choice going forward." But Walker says he will be "fully engaged" in the hunt for a new CEO to replace Bob Diamond. He says the quality of the candidates so far has been encouraging. Expectations are now high on Walker to lead the bank's recovery after a turbulent few months. Ciara Sutton, Reuters