How to mend the Libor process

Barclays’ settlement of Libor-rigging claims has sparked a full-scale financial scandal and exposed the conflicts inherent in the rate-setting process. There is a better way to organise it, says David Rowe

Perhaps the first point to make about the Libor rigging scandal is that concerns about the Libor determination process are not new. There was a flurry of interest in the topic when Libor diverged so dramatically from other benchmark rates in 2008 – but as long ago as 1998, observers had warned that the polling process used to set Libor was susceptible to misreporting, whether intentional or accidental.¹

Those familiar with the process have always recognised Libor is not based on actual