Watchdog cuts costs for new Libor setters

Tim Wallace
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THE BILL for running Libor was yesterday slashed by the City watchdog after a consultation deemed the fees payable to the regulator to be disproportionately large.

But banks submitting figures for the interbank lending rate will face a large rise in costs as they upgrade systems, pay for regulator-approved staff and regular audits.

In an overhaul of the discredited system a new body will be chosen by Baroness Hogg’s committee to run the benchmark index, and it will register for scrutiny from the regulator.

It will pay the Financial Conduct Authority (FCA) £175,000 per year to monitor its activities – below the £385,000 first proposed.

“Having reviewed the likely long-term impact on our personnel resources over the regulatory period, we have concluded that our ongoing supervisory requirements will be lower after the first six months and so we will be able to spread the costs of the initial set-up phase over a longer period,” said the report.

It expects the overall costs of running the benchmark to hit £1m per year. Meanwhile banks must increase controls over submissions, hiring monitoring staff and external auditors, as well as holding records for five years.

The new rules are expected to cost each bank more than £500,000 per year, plus a start up cost of £2.5m – substantially more than in the past. However the FCA hopes it will avoid future scandals and so save banks money in the long run.