Bank of England moves to clear up SONIA rate setting

LONDON (Reuters) - The Bank of England said on Monday it planned to change the way a benchmark for interbank lending is calculated as part of its attempts to stamp out the manipulation of key yardsticks in financial markets. The BOE said it was proposing that the methodology for calculating the Sterling Overnight Index Average (SONIA) should be based on the average rate using a volume-weighted median, rather than a volume-weighted mean. The change would make it harder for traders to influence SONIA unduly by placing outlying quotes. A money market analyst at a large international bank said the change was of the BoE's push to prevent traders from skewing SONIA and other benchmark rates and to improve transparency. SONIA has been considered as an alternative for some contracts to the London Interbank Offered Rate (LIBOR), a global benchmark for around $450 trillion (£362 trillion) of contracts that has been tainted by a market-rigging scandal. The BoE assumed overall responsibility for SONIA earlier this year and intends to implement fully its reforms by late 2017. It published a consultation paper on its proposed reforms on Monday. (Reporting by William Schomberg and Patrick Graham)