“The Bank of England will spell out next year how markets can migrate to a new "risk-free" interest rate benchmark after banks were fined billions of dollars for trying to rig Libor, the existing benchmark, a senior BoE official said on Wednesday.
Chris Salmon, the BoE's executive director for markets, said Libor, or the London Interbank Offered Rate, a benchmark for interest rates that banks charge each other, remains too prevalent.
Formerly overseen by the British Bankers' Association (BBA), Libor rates have come under scrutiny after a number of traders were accused of colluding to rig the rate. The rates are calculated through an "honor system" in which a panel of banks report their estimated costs of borrowing from each other in different currencies over differing periods.”
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