Bankers and regulators may be called to appear at European Parliament hearings into the scandal engulfing interbank lending rates as lawmakers seek to prevent any repeat of such market manipulation.
Arlene McCarthy, the legislator leading the parliament’s work on draft market-abuse rules, said hearings should shed light on how bankers were able to rig lending rates and why regulators failed to act. The move comes as the assembly and Michel Barnier, the 27 nation EU’s financial services chief, prepare legal measures to punish illicit interest-rate fixing.
“The culture of the banking industry has not changed and this culture was aided and abetted by regulatory failures,” McCarthy, who sits on the parliament’s economic and monetary affairs committee, said in an e-mailed statement today. “The more information that comes to light on the extent and gravity of this scandal the more urgent it is for the ECON committee to call in the banks and regulators to answer for their failures and manipulation.”
Confidence in the London interbank offered rate, or Libor, a benchmark for financial products valued at 360 trillion dollars worldwide, has been dented by Barclays Plc’s admission that it submitted false rates. Robert Diamond, who resigned as London-based Barclays’s CEO after the bank was fined 290 million pounds ($456 million), told British lawmakers this month that other banks also lowballed Libor submissions.
Both the parliament and the European Commission, the EU’s executive arm, are seeking to make abuse of interbank rates punishable by criminal sanctions.
The commission will next week publish plans for how EU market-abuse rules should be amended in response to the Libor scandal, Stefaan De Rynck, a spokesman for Barnier, told reporters today in Brussels.
“We’re going to propose that manipulation of these reference indices should be penalized, should be deemed market abuse,” De Rynck said. The measures, to be published July 25, would amend a draft law presented by Barnier last year.
The plans would need approval from the parliament and by national governments before they can take effect. Barnier is seeking an agreement “by the end of the year,” De Rynck said.
The commission will also examine “how we can improve governance and supervision” over how interbank rates are calculated, he said. The matter should also be examined collectively by regulators from the Group of 20 nations, he said.
The parliament, which meets in Brussels and Strasbourg, France, brings together directly elected legislators from the EU’s 27 nations to agree on laws for the bloc proposed by the commission.
In advance of the commission move, the assembly this week published suggested amendments to Barnier’s proposals.