It’s easy to get lost in the uproar surrounding Libor (the London interbank offered rate)—but here at Bloomberg we’ve been thinking about a way forward. In today’s Wall Street Journal, Bloomberg CEO Dan Doctoroff wrote about our idea for an alternative, which we’re calling “Blibor”—the Bloomberg Interbank Offered Rate—and offered to manage it as a service to global financial markets. Our solution uses actual transactions in addition to existing methods to create a more accurate and independent measure of interbank lending rates–key figures that influence transactions around the world.
You can read the op-ed in its entirety here (subscription required).
Doctoroff wrote, in part:
“Benchmarks such as Libor that rely on subjective assessments made by interested parties—regardless of any potential wrong-doing—simply cannot accurately reflect market realities….
One potential solution to this problem is to combine two types of inputs to compensate for the diminished volume in loans available for bank reference. The first input would follow the current Libor approach….
The second, supplemental inputs would consist of market-based quotes for credit default swap transactions, corporate bonds, commercial paper and other sources of credit information. Analysis of these sources of information would yield an “indicative” Blibor index…
Bloomberg’s proposed Blibor will achieve accuracy and independence without recourse to potentially stultifying government regulations. Libor is a creature of the private sector, and we feel it is incumbent on the private sector to provide its alternative.
That is why Bloomberg is offering to carry out this work on a pro bono basis…”
Lauren Meller, Bloomberg Communications