WASHINGTON, July 17: Fed Chairman Ben Bernanke on Tuesday said that revelations a key inter-bank lending rate had been rigged were “very troubling,” undermined confidence in the financial system and should be fixed.
Speaking to Congress, Bernanke said the disclosures, which have resulted in a large fine for British bank Barclays, showed the so-called Libor system was “structurally flawed.” Under current rules, a small panel of banks submits an unregulated estimate of what they would pay to borrow from each other.
A central range is then found for the rate — which underpins the cost of everything from mortgages to credit cards.
“Libor is a critical benchmark to many financial contracts,” Bernanke told US lawmakers.
“The actions of traders and banks that have been disclosed are not only very troubling in themselves, but they have the effect of undermining markets,” Bernanke said in testimony to the Senate Banking Committee.—AFP