Chairman Gary Gensler's Remarks Before the European Parliament's Economic and Monetary Affairs Committee
CFTC Chairman Gary Gensler asserted that it is time for a new or revised benchmark "anchored in actual, observable market transactions," arguing that, if benchmark rates don't have transactions to rely on, then the reliability of the benchmark is significantly and necessarily limited. He argues that there are at least three issues with LIBOR and other survey rates:
- "The first and possibly the most significant issue with LIBOR is that the number of banks willing to lend to one another on an unsecured basis has been sharply reduced over the years. Also, such lending has diminished because of the downgrading of large banks’ credit ratings.
- "The second issue with LIBOR is that the banks that make LIBOR submissions to the British Bankers Association (BBA), an industry association, are doing so essentially without oversight. There are no specific controls to prevent banks from intentionally or unintentionally herding together and reporting the same or similar rates based on information they share with each other or through intermediaries, such as inter-dealer brokers.
- "The third issue with LIBOR and similar interest rate benchmarks is that banks that submit their estimated borrowing rates naturally have inherent conflicts of interest."
View statement here(links externally to CFTC website).See also: Oral remarks.