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more libor, more questions about financial regulation July 9, 2012

Posted by Bradley in : financial regulation , trackback

Paul Tucker spoke to the Treasury Select Committee this afternoon, denying that the Bank of England had any responsibility with respect to Libor or the BBA, commenting on how difficult things were during the financial crisis, and expressing support for a twin peaks system of financial regulation. Of course these hearings are happening at a time when the UK Parliament is addressing issues of financial regulation with a Financial Services Bill in progress and a Banking Bill to come. Some of the personnel involved in regulation will continue to be involved in the new regimes, so those people have an interest in influencing how the changes are made. And one issue is how much enforcement power the regulators have. Members of the committee noted that the Barclays settlement resulted in significant part from the efforts of the US agencies involved. Regulators often want to blame problems on other jurisdictions. For example, giving evidence on swaps to the House Financial Services Committee Gary Gensler of the CFTC said last month (with a number of specific examples of harm caused to the US by actions outside the US in other regulators’ jurisdictions):

Balanced implementation of regulatory reform requires an acknowledgment that the activities of financial institutions engaging in transactions or setting up operations abroad can pose a profound threat to U.S. taxpayers and the economy.

Was it convenient for the CFTC/DOJ that the first bank to settle over Libor was not a US bank? Citigroup and JP Morgan are among the targets of investigators.

Michel Barnier has also commented on the Libor problem:

L’actualité le démontre avec l’affaire Barclays et la manipulation du taux de refinancement des banques, les comportements scandaleux restent possibles sur les marchés financiers. Les travaux sont en cours au sein de votre Commission pour renforcer la lutte contre les manipulations de marché et sanctionner les abus… Je considère que nous devrons sans doute renforcer ces textes pour couvrir plus directement de telles manipulations.

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