Treasury's Miller Says Markets Will Innovate on Libor
The U.S. Treasury Department’s top domestic finance official said she expects markets to “innovate” in response to concerns about the London interbank offered rate.
“There are other alternatives that are being developed and used in markets, and I think we’ll have robust debates about survey-based, transaction-based references,” Mary Miller, the Treasury’s undersecretary for domestic finance, said at a conference in Washington today. “Probably you’ll see a regulatory response, and that’s under way and will play out this fall. But I also think the markets are going to innovate around this.”
Confidence in Libor, a benchmark for securities worldwide, was hurt by Barclays Plc’s admission that it submitted false rates. A probe by U.K. and U.S. authorities cost the London- based bank a record 290 million-pound ($449 million) fine and led to the ouster of Chief Executive Officer Robert Diamond.
Miller also said the Volcker rule ban on proprietary trading is “still very much a work in progress” and there is widespread demand for “a simpler rule, one that is workable for the regulators, workable for the industry.”
The Volcker rule, part of the Dodd-Frank financial overhaul law, is intended to limit activities that put customers’ federally insured deposits at risk. Regulators have said they hope to finish the rule by the end of the year and have given banks until July 2014 to implement it as long as they make a good-faith effort to comply.
Miller also reiterated the Treasury’s view that the U.S. will reach the $16.4 trillion federal debt ceiling in the fourth quarter of this year and can use “extraordinary measures” so that Congress doesn’t have to raise the limit until 2013. The measures Treasury can take include suspending the sale of bonds to finance state and local infrastructure projects.
Miller was speaking at a conference held by Deloitte LLP, the Bretton Woods Committee and the University of Maryland’s business school.
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