By Jonathan Spicer and Leah Schnurr
NEW YORK, July 18 U.S. Treasury Secretary
Timothy Geithner defended himself against criticisms that
regulators should have taken bigger steps to address concerns
over the credibility of the benchmark Libor interest rate,
saying on Wednesday that U.S. authorities had pushed early and
forcefully for reforms.
The reliability of the London interbank offered rate, which
underpins transactions worth trillions of dollars, has been
rattled by revelations that bankers manipulated it to profit on
trades and hide their own borrowing costs during the 2007-09
Britain's Barclays PLC is the only bank so far to
admit any wrongdoing in giving false information as part of the
complex process of setting the rate, but documents released last
week indicate the practice may have been widespread during the
Geithner said that resolving problems with Libor would not
be left just to British authorities and that the response to his
suggestions for reform in 2008 "didn't go far enough."
"We acted very early in response to the concerns that the
processes to set this rate were impaired and flawed, and
vulnerable to misrepresentation," Geithner said at the CNBC
Institutional Investor Delivering Alpha conference.
"The U.S., to its credit, set in motion at that stage a
very, very powerful enforcement response, the first results of
which we have now seen," he said.
"There is more to come," he added, but provided no details.
Geithner, then head of the New York Federal Reserve, sent an
email to Bank of England Governor Mervyn King in June 2008,
recommending six ways to enhance the credibility of Libor after
Barclays had flagged concerns as early as 2007.
The BoE passed on Geithner's thoughts in an email to the
British Bankers Association - the group responsible for Libor -
which at that stage had already decided to start a review of the
But few of Geithner's measures were adopted, and questions
linger over what U.S. and UK regulators have done since then to
fix the issues with Libor.
"They took some modest reforms in response to our
suggestions in '08, but they didn't go far enough," Geithner
said. "And we have now taken the initiative to set up a broader
effort involving all the countries that matter around the world,
that have a big stake in this, to try to make sure we push" for
King, governor of the BoE since 2003, dismissed accusations
on Tuesday that he was asleep at the helm while Barclays traders
tried to skew Libor. He said he would raise the issue of reform
when he meets with fellow central bank governors from around the
world in Basel, Switzerland, in September.
Libor is calculated daily in London when panels of banks
submit estimates of how much it costs them to borrow. It is a
major index that helps judge the health of banks and influences
rates from mortgages to student loans to credit cards.
On Tuesday, Federal Reserve Chairman Ben Bernanke called the
process "structurally flawed" and said he wanted to see changes.
More than a dozen banks are being investigated for their
roles in setting Libor, including Citigroup Inc, JPMorgan
Chase & Co, Deutsche Bank, HSBC Holdings Plc
, UBS AG and Royal Bank of Scotland Group Plc
Britain's Financial Services Authority is due to complete a
review of how Libor should be regulated by the end of the
summer, with changes expected to be inserted into a financial
law currently before Parliament.