U.K. plans to scrap Libor contracts tied to Swedish kronor will have a limited effect on the markets, according to Sweden’s financial supervisor.
“We looked at the issue and have been in touch with participants in Sweden. Our overall assessment is that the impact will be rather marginal,” Uldis Cerps, head of the Swedish Financial Supervisory Authority’s banking unit, said in a phone interview today. “We’ve made a qualitative estimate and have come to the conclusion that as far as the Swedish banks are concerned, the volumes of contracts that are based on Libor in SEK are relatively modest and that the situation is also mitigated by the suggested transition period.”
The U.K. Financial Supervisory Authority today proposed new rules governing the London interbank offered rate after Barclays Plc, Britain’s second-biggest lender, paid a record-fine in June for manipulating the rate. The proposal included scrapping Libor reference rates for Swedish kronor, as well as for Australian, Canadian and New Zealand dollars and Danish kroner.
The Stockholm interbank offered rate doesn’t have “problems of the same dignity we have seen in some other indexes because it’s calculated on the prices at which banks are ready to lend to other banks,” Cerps said.
Libor is calculated by a poll carried out daily by Thomson Reuters Corp. on behalf of the BBA, a banking industry lobby group that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. At least a dozen banks are being probed by regulators worldwide over allegations they colluded to manipulate the benchmark to profit from bets on derivatives.
“We and the Swedish central bank, the Riksbank, are in talks with the Swedish Bankers’ Association among others about how and to what extent we need improvements in the calculations of Stibor and of course the Libor recommendations will be important input in our own discussions,” he said.
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