Data about banks’ ability to borrow from each other should be kept anonymous and based solely on real transactions between financial institutions, according to Barclays, the only lender to be fined so far for attempting to manipulate Libor rates.
The British bank set out a series of previously unreported ideas for overhauling Libor following its £290m fine by regulators in the UK and US in June.
In its submission to the Wheatley Review of Libor, which published its recommendations yesterday, Barclays said that regulators should compel submissions from "the widest possible range of relevant market participants, in order to remove the question of incentives to participate".
Allowing banks to submit Libor rates anonymously – a central plank of the Barclays submission – was rejected by Martin Wheatley, who headed the Government-commissioned inquiry and who is proposing a three-month delay before the borrowing rates are made public.
Barclays argued that it would have "eliminated the signalling effect of the current process", a reference to the actions of employees who in 2008 falsified rates to discourage the notion that Barclays was finding it more difficult than other banks to fund itself.
Underlining the endemic misbehaviour within the banking sector, Barclays said that even with a new Libor framework and governance structure in place, "there would still potentially be the incentive and means to attempt to manipulate the rate, albeit diminished.
Accordingly, any new process for the governance of LIBOR must ensure that data is interrogated to identify potential abuse and that there is an appropriate degree of transparency to regulators".
The submission offers the most detailed remarks so far from Barclays about Libor since it settled with regulators, sacrificing Bob Diamond, its chief executive, just days later.
The bank advocated specific powers of criminal investigation and prosecution in relation to Libor manipulation, which Mr Wheatley said yesterday would require an amendment to the Financial Services and Markets Act.
While Barclays is the only bank to be fined for Libor abuses to date, others, including the taxpayer-backed Royal Bank of Scotland, are expected to follow suit within months.
