Banks pull out of dozens of benchmarks after rate-rigging scandals 

Some of the world’s largest banks have stopped contributing to dozens of financial benchmarks to avoid further litigation risk in the wake of the Libor and foreign exchange rate rigging scandals.

Deutsche Bank, Citigroup, JPMorgan and UBS, among others, have set up task forces to scrutinise submission processes for hundreds of benchmarks in everything from commodities to interbank lending as they seek to cut their litigation and regulatory risk, several people close to the situation said.

The withdrawals have already helped speed up revamps of the silver and gold fixes and reforms to some interbank lending benchmarks so that they are based on actual transactions rather than bank submissions.

But investors warned the crackdown could leave less liquid markets without any benchmark at all and make it impossible to determine whether they are getting fair prices on their derivatives and good returns on their investments.

Banks have already paid more than $6bn for wrongdoing in the Libor rate manipulation scandal, and analysts at Morgan Stanley estimate that the probes into the alleged rigging of a crucial forex fix will cost several of the key US and European banks $1.5bn to $2bn in fines.

European Union lawmakers are also working on ideas for a stricter regulation of benchmarks, while the Financial Stability Board, a powerful global regulatory umbrella body, has this week made proposals to reform a key forex benchmark.

 

Source: FT-Banks pull out of dozens of benchmarks after rate-rigging scandals

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