May 14 (Bloomberg) -- ICAP Plc, the biggest broker of transactions between lenders, has no ``concrete timetable'' for a U.S. alternative to the London interbank offered rate as it seeks to sign up banks.

``We hope to launch it soon, but we don't have a concrete timetable,'' Lou Crandall, chief economist at the London-based company's New York research unit, said in an interview. ``We're having individual discussions with banks who understandably want to make sure they know what they're getting into before taking the jump.''

ICAP plans to start the New York Funding Rate as the accuracy of Libor, a benchmark for corporate loans, at least $347 trillion of derivatives and 6 million U.S. mortgages, is being called into question. For the first time since 1998, the British Bankers' Association, which oversees Libor, is considering changing the way it sets the measure, according to Chief Executive Officer Angela Knight.

``Libor is absolutely ripe for reform as there's always a colossal difference between the rate banks quote and the one they trade at,'' said Marc Ostwald, a fixed-income strategist at Insinger de Beaufort SA in London. ``But I really can't see how this ICAP system is going to take off. The cost of changing from Libor would be phenomenal and would take years and years of legal wrangling.''

Libor Benchmark

The new index will be based on an anonymous daily survey of at least 24 banks, Crandall said. ICAP will ask participants each morning to estimate the cost of funding for one- and three- month loans to a ``representative'' bank. NYFR would be calculated using the quotes of the middle half of that group. The Wall Street Journal reported on May 1 that ICAP planned to introduce the new gauge as soon as last week.

Libor is used as a benchmark for the $1.2 trillion of interest-rate swap contracts traded every day, according to the Bank for International Settlements in Basel, Switzerland. Derivatives are financial instruments derived from stocks, bonds, loans, currencies or commodities, or linked to specific events like changes in interest rates or the weather.

ICAP may not succeed in establishing its rate as an alternative to Libor because so many securities and loans are tied to the BBA's measure, said Brad Golding, a managing director at Christofferson Robb & Co., a New York-based money manager.

``It's not clear to me who is agitating for a change'' to Libor, Golding added. It's ``a very established measure.''

Libor `Too Low'

The BIS said in a March report that some lenders may have submitted inaccurate information to the BBA to prevent their borrowing costs from escalating. Banks are understating rates on concern they will be perceived as weakened by the credit turmoil that forced banks to record $323 billion of losses and writedowns, analysts at New York-based Citigroup Inc. wrote in a report last month.

``The anecdotal evidence is that the pricing which is determining the Libor fixing every day is not in line with the real trading which takes place,'' said Kornelius Purps, a fixed- income strategist in Munich at Unicredit Markets and Investment Banking, a unit of Italy's largest lender. ``That means Libor rates might be too low and should be higher.''

The association asks 16 member banks including HSBC Holdings Plc, Citigroup and UBS AG how much it would cost to borrow from each other for 15 different periods in currencies including dollars, euros, Swiss francs and pounds. It then calculates averages and publishes the results every day after 11:30 a.m. in London. Only three of the member banks are based in the U.S.

`Serious Issues'

``We have not run away or hidden from the need for reform or the need for review'' of ``serious issues'' in the U.K. financial-services industry, the BBA's Knight said at a hearing of a parliamentary committee yesterday in London. The association is set to announce the results of its broadest review of the way it sets Libor in a decade on May 30.

The BBA said April 16 that any member banks found to be misquoting rates will be banned.

``We have had contact with ICAP and they have assured us that this is complementary, and in no way were they intending to do something competitive to Libor,'' Knight said in an interview May 12.

The BBA should revamp its Libor-setting process by ensuring lenders confirm offered rates rather than by simply polling the information of borrowing banks, said Brian Yelvington, a strategist at CreditSights Inc. in New York.

That way, there would be ``no way to hide since it goes from being a `poll' of sorts to a confirmed trade,'' he said.

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Ben Livesey in London blivesey@bloomberg.net

Last Updated: May 14, 2008 11:48 EDT