The breadth of the scandal about the manipulation of benchmarks, such as LIBOR and EURIBOR, has pushed the European Commission to yesterday suggest amending its proposals of 20 October 2011 which revises EU legislation on market abuse, including criminal sanctions, currently under discussion in the European Parliament and Council.
Liberal Democrat Euro MP Sharon Bowles Chair of the Economic and Monetary Affairs Committee, welcomed the thrust of the Commission’s proposal to outlaw manipulations of benchmarks, punishable as criminal offence, explaining:
“Manipulation of LIBOR and other similar benchmarks is a seismic event in financial markets, which affects the pricing of many other financial instruments. Not only do we need to ensure the strongest punishments for such market abuse, we will need to examine how benchmarks are produced and if possible move to a system based on actual transactions rather than estimates.”
Sharon Bowles has already tabled an amendment to the existing Commission’s proposal to include in the definitions of market abuse manipulations of benchmarks.
Moreover, added the ECON Chairperson:
“Since the start of the crisis we have had revelations of complexity, concealment and total failure of understanding what has been going on or of any moral compass. It is clear that we must change the culture in banking and I doubt that it is possible to do this through regulation and supervision alone. Not only have banks become too big to fail they are too big to manage and too big to supervise.”
That’s why, Ms Bowles concluded:
“There are competition aspects to this behaviour – like a cartel – and the full force of competition policy should be brought to bear. However crippling fines on banks which have benefitted from taxpayer’s money may be an oxymoron. The punishment should rather be the breaking up of big institutions, by which I mean beyond simply separating retail and investment banking.”
Note to editors:
The split being called for applies not only to retail and investment banks but also smaller banks in general.
The LIBOR (London Interbank Offered Rate) is the benchmark rate calculated in the London interbank market, in practice the average interest rate applying when banks lend money to each other.
The EURIBOR (Euro Interbank Offered Rate) is the benchmark rate for interbank lending within the Eurozone. They are compiled from estimates submitted by banks.