FSB Sees Progress on Risk-Free Interest-Rate Benchmarks

Global regulators are making progress in identifying potential risk-free benchmark rates as they respond to manipulation scandals that have shaken the financial industry, the Financial Stability Board said.

“Detailed data collection exercises have been undertaken in key markets and work is now underway to identify potential” risk-free benchmark rates where these don’t exist, the Basel-based FSB said in a report on Thursday. “An issue that several authorities are considering is how to facilitate the availability of RFRs at terms longer than overnight.”

The FSB, led by Bank of England Governor Mark Carney, has published recommendations to make it harder for traders to exploit key benchmarks in the $5.3 trillion-a-day currency market. It proposed changing how the most popular rates from WM/Reuters are calculated, with Barclays Plc, UBS Group AG and Royal Bank of Scotland Group Plc among European banks that were fined for rigging global currency markets.

Since July 2014, the administrators of the most widely used benchmarks for interbank unsecured lending markets -- the London, Euro and Tokyo interbank offered rates -- have taken steps including “reviews of respective benchmark methodologies and definitions, data collection exercises and feasibility studies, consideration of transitional and legal issues and broad consultations with submitting banks, users and other stakeholders,” the FSB said.

The regulator will continue to monitor progress in implementing its recommendations and publish another progress report in a year.

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