17 July 2019

NYSE Euronext To Take Over Libor

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NYSE Euronext will take over and run the scandal-plagued Libor interest rate starting in early 2014.

Libor is a collection of rates generated for various currencies across 15 different time periods. The quotes are used as benchmarks for roughly $10 trillion in loans and some $350 trillion in derivatives. For example, an adjustable-rate mortgage might require you to pay interest based on a Libor rate plus 2%.

The British Bankers' Association, which had been administering the London interbank offered rate for decades, came under fire during a rate-rigging scandal that shook loan-making and derivatives around the world. At least 10 firms in the financial services sector have been linked to the rigging case and individual traders are now facing criminal charges in court.

Major banks, including UBS (UBS) and Royal Bank of Scotland (RBS) to pay well over $2 billion in penalties after admitting to manipulating interest rates. Barclays (BCS) admitted to manipulating Libor to appear stronger during the financial crisis, deliberately understating its borrowing costs, and to benefit trading positions tied to the rate. It paid $450 million as part of a settlement with U.S. and U.K. regulators.

The U.K. Treasury made the decision to give NYSE Euronext the power to run Libor following a competitive bidding process. The British Bankers' Association said it would work to ensure Libor was smoothly transitioned over to NYSE Euronext.

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