CML plans response to Libor review
The Council of Mortgage Lenders has called for members to submit views on reforms of Libor.
A newsletter from the trade body said it was planning a short response to Martin Wheatley’s Libor review, due on 7 September.
It said: “Among other issues, the review asks whether it would be better to strengthen Libor or replace it with an alternative. If Libor were to be discontinued, it would be important to have an orderly transition and a clear set of parameters for lenders in terms of how they should migrate any existing Libor-linked contractual arrangements.”
Following the Libor fixing scandal in July, Robert Sinclair, director of the Association of Mortgage Intermediaries said while rate-rigging would have had a massive effect on banks’ bottom lines, the effect on consumers would have been miniscule and should not affect regulation such as the FSA’s mortgage market review.
He said: “The levels of movement in the Libor rate that might have been engineered would be relatively minor, but because of the amounts involved, at a capital market level, it would have had significant effect on banks’ trading books.
“However, this means the material effect on consumers would be relatively small and the difference in mortgage rates people would have paid would be miniscule. What has changed is the trust in the integrity of the organisations and their ability to do the right thing.”
Mr Wheatley was commissioned by the Treasury to review the Libor system after the FSA fined Barclays £290m in June for attempting to manipulate the figure.
He said retaining Libor unchanged in its current state is not a viable option, given the scale of identified weaknesses and the loss of credibility that it has suffered.