by Wadsam | July 18, 2012 5:58 am
Ben Bernanke, Chairman of the US central bank, said he did not have full confidence in the Libor system, as it is “structurally flawed”.
The US was informed of some wrongdoings happening in the bank in 2008 and recommendations were made to improve it. But, the UK body will not comply to it.
The Libor scandal erupted last month when Barclays was fined USD 450m for trying to rig the Libor rate by underreporting it to appear less costly in comparison to other banks.
Asked about US regulator’s response to the manipulation of Libor rates, Mr. Bernanke said that the Federal Reserve Bank of New York “quickly” responded to it by informing all the relevant authorities in both the US and the UK.
Democratic senator Robert Menendez said the Libor scandal represented the “culture of greed and lying” in the banking world.
“This is a huge issue. [Libor] is more than a benchmark,” Senator Menendez said, citing figures which indicated that in some areas of the US, the majority of sub-prime mortgages were linked to it.
Mr Bernanke said it was “a major problem for our financial system and… we need to address it.”
Ben Bernanke also told a Senate committee that it was not yet known whether any US banks were involved in the rigging of Libor.
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