Why Saudi Arabia’s Libor-Like Rate Is in Focus Amid Surge: Q&A
- Regulator told banks to stop lowballing rate, sources said
- Rate jumps after banks said to get letter from regulator
During the 2008 global financial crisis, regulators discovered some banks had routinely manipulated their contributions to the London interbank offered rate to disguise their real cost of funding, affecting the value of trillions of dollars of loans and derivatives. The scandal resulted in more than $9 billion in fines. Fast forward eight years and benchmark interest-rate accuracy is again an issue, this time in Saudi Arabia, where the regulator is said to have told banks there to stop lowballing submissions. Here we examine the Saudi interbank offered rate, why it matters and what to expect.
The regulator hasn’t commented publicly on the matter and there has been no accusation of wrongdoing. The 15 banks that participate in setting the rate declined to comment or didn’t respond to requests for comment when contacted by Bloomberg.