The British Bankers' Association is reassessing how it calculates the London Interbank Offered Rate (Libor) as concerns over the credibility of its measurement intensifies.
Although there are widespread fear Libor has blown out significantly above base rates, economists are worried banks may understate the rates they are prepared to use when lending to each other, downplaying liquidity problems, according to The Daily Telegraph.
Pressure for a Libor overhaul has been mounting following a report last week by Citigroup interest rate strategist Scott Peng.
‘We believe the current liquidity crisis has damaged the inter-bank market, resulting in Libor sets that at times deviate significantly from real inter-bank lending rates,’ he said.
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