Banks surrender their control of the running of Libor

The BBA, Britain’s main bank lobby group, said members had approved handing over the running of Libor after the BBA was stripped of overseeing the benchmark.

The UK’s financial regulator said in September last year that the BBA had been careless and subsequently stripped it of its governance and oversight of the Libor benchmark.

An independent body will be selected by open tender, to be run by Sarah Hogg, to start running Libor this year.

Baroness Hogg, a member of the Treasury’s board, chairs the Financial Reporting Council, the independent corporate governance regulator.

The BBA said members gave formal approval for the transfer to a new operator at an extraordinary general meeting held yesterday.

A spokesman for the BBA said: “The absolute priority is to ensure the provision of a reliable benchmark which has the confidence and support of all users, contributors and global regulators.”

A review of Libor – the London interbank offered rate – by the Financial Services Authority (FSA) in September laid out a 10-point plan to restore confidence in an interest rate that is used to price trillions of dollars of financial products from mortgages to derivatives contracts.

The review said there were no better alternatives now and the transition to a new benchmark would be difficult because Libor is so deeply embedded in the financial system.

Three banks – Barclays, Royal Bank of Scotland and UBS – have been fined a total £1.7bn for manipulation of rates.

In addition, more banks who contribute to the panel are being investigated, in a move which has helped to discredit the benchmark.

The BBA spokesman said: “An extraordinary general meeting of BBA members has given its formal approval to the board to deliver the transfer of BBA Libor to a new operator which will be selected by the Hogg Committee.

“The absolute priority is to ensure the provision of a reliable benchmark which has the confidence and support of all users, contributors and global regulators.”