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LONDON, July 17 (Reuters) - Interest rates used to price financial contracts worth trillions of dollars should in future be based on actual market transactions and not banks' judgements, Bank of England Governor Mark Carney said in minutes of a meeting released on Monday.
The pricing of financial contracts based on the London Interbank Offered Rate (Libor) led the BoE and other central banks to look at alternatives based on actual market transactions.
Libor is based on submissions from banks of interest rates they believe they would be charged by other banks for borrowing money.
Carney told industry representatives attending the BoE's Roundtable on Sterling Risk-Free Reference Rates on July 6 that controls on Libor rate submissions from banks are now much tighter.
But, according to minutes of the meeting released by the BoE on Monday, Carney said a situation where "a judgement-based benchmark underpinned an estimated $350 trillion-worth of contracts was not desirable."
"The Governor finished by noting that a shift towards robust, fully transaction-based reference rates was necessary and, over time, would happen," the minutes said.
The BoE is developing its own "risk free" benchmark known as SONIA, but widespread adoption could only proceed with broad support from benchmark users, Carney said. (Reporting by Huw Jones; Editing by Rachel Armstrong)