BRUSSELS (MNI) – The European Commission may seek to regulate how
benchmark securities indices such as Libor are set, EU Internal Markets
Commissioner Michel Barnier said on Wednesday.

A proposal to criminalise the manipulation of benchmark indices,
unveiled today, was not the end of the Commission’s plans to try to
stamp out such behavior, Barnier warned.

“Our work does not end here. The case of the Libor affair
illustrates very clearly that some financial institutions do not respect
the code of conduct and the rules of transparency and conduct expected
of them,” said Barnier

“Everything is on the table except the status quo and
self-regulation.”

Banks such as Barclays involved in rigging the Libor rate displayed
a “total lack of moral values,” said Barnier.

The Commission, European Central Bank and international standard
bodies including the Financial Stability Board, and the International
Organization of Securities Commissions are “currently examining how
these benchmarks are composed” because there is a “need to prevent
further risk of manipulation of derivatives,” Barnier said, highlighting
the risk to commodity markets, including oil, metals and agriculture.

“The ECB has a crucial role to play in centralized and integrated
supervision,” he said.

Central bankers from across the EU will meet in Frankfurt early
September to look at the issue of securities benchmarks, said Barnier.

The Commission is considering whether “a systematic approach on how
benchmarks are composed,” is needed and is also looking at governance
and supervision issues with a view to possibly proposing new legislation
by the end of the year, Barnier said.

One issue being considered is whether benchmarks should only be
based on realized trades, rather than intentions as in the case of
Libor. The Commission may also examine the necessity of proposing
specific formulae, Barnier suggested.

Speaking at the same press conference, EU Justice Commissioner
Viviane Reding criticized the Bank of England for failing to act sooner
over suspicions that Libor was being manipulated.

“I am not very convinced by the actions of the Bank of England as a
supervisory authority,” she said adding that the Libor scandal had
revealed “major shortcomings”.

Brussels has been investigating possible manipulation of the Libor
and Euribor interbank lending rates since March last year and has
determined that such activities are currently not expressly prohibited
by existing legislation.

–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com
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