The EU wants to regulate financial benchmarks that are used in transactions worth trillions of dollars globally, an effort to prevent market manipulations such as the one involving the London interbank offered rate (LIBOR), an interest rate banks use to borrow from each other.
The European Commission, the executive arm of the 28-nation EU, on Wednesday unveiled draft legislation that tightens the financial instruments’ oversight, increases transparency and introduces stiff fines for manipulations.
Under the proposal, national regulators and a coordinating European body are granted new powers to investigate possible rigging or conflicts of interests and can issue fines of up to 10 percent of a firm’s revenue.
LIBOR is an average rate that measures how much banks expect to pay each other for loans. It underpins trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans. As a result, its manipulation can cause significant losses to consumers and investors, and distort the real economy.
“Market confidence has been undermined by scandals and allegations of benchmark manipulation,” said EU Commissioner Michel Barnier, who is in charge of financial services. “Some banks lied about the going interest rates by manipulating the index.”
“Today’s proposals will ensure for the first time that all benchmark providers have to be authorized and supervised — they will enhance transparency and tackle conflicts of interests,” he added.
The LIBOR scandal emerged last year when authorities realized banks — including Royal Bank of Scotland, Barclays and Switzerland’s UBS — were submitting false data to gain market advantages for their own trades.
US and UK regulators fined Royal Bank of Scotland more than US$460 million for rate-rigging. Barclays’ role led to a US$453 million fine and the resignation of chief executive Bob Diamond. Swiss bank UBS was fined US$1.5 billion, including a US$100 million fine imposed on subsidiary UBS Securities Japan during sentencing on Wednesday in the US.
The Commission’s proposal still needs approval by the European Parliament and the governments of the 28 member states, adding to a busy schedule of financial reforms to be pushed through in the coming months before parliament switches from working to full-time campaigning ahead of next May’s elections.
The proposal targets LIBOR and the Euro interbank offered rate (EURIBOR) interest rates, but its scope includes many other benchmarks that are used to reference financial instruments.
An initial idea to hand oversight of the benchmarks such as LIBOR and EURIBOR to a European agency was thrown out amid resistance from Britain — which is home to the bloc’s biggest financial industry — and concerns that the relatively small European Securities and Markets Authority (ESMA) agency does not have the resources for the job, EU officials said.
However, if national regulators cannot reach an agreement between them on a particular case, Paris-based ESMA would be able to decide by binding mediation, according to the proposal.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS