Supervision of Libor may go to Paris

The draft law, to be published in a few weeks, would propose shifting the supervision of Libor from London to Paris.

Two British banks, Royal Bank of Scotland and Barclays, and Swiss bank UBS, were fined a total of £1.6bn for rigging Libor, with other banks set to be punished for similar abuses.

Libor – the London Interbank Offered Rate – is used as a basis for pricing financial products from home loans to credit cards worth over $300 trillion globally.

“The final principles now give clarity to benchmark providers and users in the European Union about what is expected of them when engaged in this critical market activity,” said Steven Maijoor, chairman of the European Securities and Markets Authority (ESMA), the Paris-based pan-EU watchdog.

The principles were drawn up with the European Banking Authority to provide a framework for administrating, calculating, publishing and submitting quotes for compiling all benchmarks.

Draft guidelines were published in January and yesterday’s final version also requires benchmark providers to have contingency plans if data for compiling the index dries up. Another new element is data used to compile a benchmark should represent the underlying asset.