The process for setting a key global interest rate is flawed and poses a risk to the stability of financial markets, according to a report from the U.S. Treasury Department.
A British banking trade group sets the LIBOR every morning after international banks submit estimates of what it costs them to borrow money. The rate affects interest on many loans.
Banks are capable of manipulating the London interbank offered rate (LIBOR), the Treasury's Office of Financial Research said in the report released Friday.
The report cites other risks to financial stability: roughly 12 million U.S. homeowners who owe more on their mortgages than the value of homes; continued risk-taking by big financial institutions; and the European debt crisis. The report also said the agency may require financial companies to submit data on transactions and trading positions. The office says its needs to review that data to better understand what's happening in financial markets.
A number of major banks, including Citigroup and JPMorgan Chase, are also being investigated.
The Office of Financial Research was created by the 2010 financial overhaul law. Under the law, the agency can collect and analyze financial data so it can give early warnings to regulators of potential problems.
Some Republican lawmakers have objected to creation of the office and its mandate. They say its power to collect confidential information from companies is too broad.
Read more: LIBOR process flawed, U.S. regulator finds - Business - CBC News
No comments:
Post a Comment