Save LIBOR? CFTC’s Gensler Addresses Euro Parliament


Speaking in front of European Parliament on Monday, CFTC chairman Gary Gensler addressed the issue of whether LIBOR will survive its recent setbacks.

Gensler, appearing via video feed, was unable to travel to overseas due to four broken ribs and punctured lung from a recent fall. He compared his own injuries to LIBOR’s.

“The question is can LIBOR be sufficiently mended, or is this a circumstance where it’s better to be replaced with a rate based on observable transactions?”

Injuries to LIBOR

Gensler outlined the outstanding problems with LIBOR.

“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,” Gensler said.

He went on to add that lack of oversight and conflicts of interest have raised concerns about whether the Barclays case was isolated.

“I believe this market data says something about the health of this patient, LIBOR, that goes beyond the Barclay’s case,” Gensler said.

Healing Process

Gensler was adamant that either LIBOR or its successor must employ observable transactions. As to whether LIBOR will survive?

“International regulators and market participants can work to address LIBOR’s issues of governance and conflicts of interest, but the fundamental issue remains: the underlying market for unsecured interbank borrowing has largely diminished,” Gensler said.

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About the Author

Felix Shipkevich
Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.