Recognizing the need for an independent third party to oversee Libor, my firm is willing to assume the responsibility if, and only if, the banks that are on the Libor panel provide ultra transparency and disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details.
As I have explained numerous times, ultra transparency is needed for two reasons.
First, it provides banks with deposits to lend the information they need to continually assess the risk of the banks looking to borrow. As a result, the interbank lending market unfreezes and remains unfrozen.
Second, it provides the actual observable transactions that can be used in calculating Libor. These transactions are audited and can be independently confirmed by market participants.
In my private market solution, I proposed setting up a data warehouse to collect, standardize and disseminate the data the banks disclose under ultra transparency.
The day to day operation of the data warehouse will be performed by a global information technology firm.
My firm will oversee and coordinate the data warehouse so that it provides the most accurate data possible, the easiest access to the data possible and the most easily usable data possible.
All that it takes to get the data warehouse off the ground is for Martin Wheatley to recommend it. I have some confidence he will do so as any other solution he might recommend is likely to substitute the opacity of complex rules and regulatory supervision for transparency. Without transparency, there is no reason to trust the solution.
The British Bankers' Association is preparing to give up responsibility for the London interbank offered rate, or Libor, the scandal-plagued benchmark interest rate that the group created 26 years ago.
The council of the BBA, a private trade association that represents more than 200 banks that do business in the U.K., voted earlier this month to relinquish control of overseeing Libor, according to a person familiar with the matter.
The council's vote came in anticipation of a top British regulator's expected recommendation later this week that the BBA no longer be in charge of the rate, which serves as the basis for trillions of dollars worth of financial contracts, this person said.