Conundrum

daviesee

Okay, so this may be a silly mind process but here you go:-

Most people in London think it is the centre of the universe.
This is (possibly) based on the fact that the banking industry is based there and that rules the world.
Most people there want to remain in Europe.
Europe wants to take the power (Libor) away from London.
http://www.bbc.co.uk/news/business-22796452
What to do?

Stay in Europe and lose power?
Come out of Europe and try to say "It's my ball and my game"?

As DDD might say, discuss.....

spasypaddy

London >>>>>>>>>>>>>>>>>>> anywhere else

stu-bim

It's not really as simple as 'my ball and my game'
It is a quoted rate used to determine a fair base for lending around the world. If there is not enough transparency in it or any doubt about its accuracy it will not be used.

A simple example anywhere in the world would be a US$20,000,000 mortgage with a rate of LIBOR 3 month plus 4%

It does not matter who controls it but the faith in its integrity held by lenders and more importantly borrowers

US prime plus x% or EURIBOR plus x% are simple alternatives

I am sure there are other more technical issues relating to it but it could become redundant for simple contracts overnight under certain conditions thus devaluing its importance

daviesee

stu-bim wrote:

It's not really as simple as 'my ball and my game'
It is a quoted rate used to determine a fair base for lending around the world. If there is not enough transparency in it or any doubt about its accuracy it will not be used.

A simple example anywhere in the world would be a US$20,000,000 mortgage with a rate of LIBOR 3 month plus 4%

It does not matter who controls it but the faith in its integrity held by lenders and more importantly borrowers

US prime plus x% or EURIBOR plus x% are all simple

I am sure there are other more technical issues relating to it but it could become redundant for simple contracts overnight under certain confitions

Excellent! Someone who maybe knows what he is talking about.
So.....
Is it stripping the UK of powers and centralising them in Europe or not?

-spider-

LIBOR is not British powers - it is Bankers powers. Where it is set will not make much difference. They were at it in London and they will probably be at it elsewhere.

Kieran_Burns

stu-bim wrote:

It's not really as simple as 'my ball and my game'
It is a quoted rate used to determine a fair base for lending around the world. If there is not enough transparency in it or any doubt about its accuracy it will not be used.

A simple example anywhere in the world would be a US$20,000,000 mortgage with a rate of LIBOR 3 month plus 4%

It does not matter who controls it but the faith in its integrity held by lenders and more importantly borrowers

US prime plus x% or EURIBOR plus x% are simple alternatives

I am sure there are other more technical issues relating to it but it could become redundant for simple contracts overnight under certain conditions thus devaluing its importance

Today I have learned how it feels to be the person that asks me a complex IT related question and get a complete answer...

stu-bim

daviesee wrote:

Excellent! Someone who maybe knows what he is talking about.
So.....
Is it stripping the UK of powers and centralising them in Europe or not?

I have no experience of any complex financial instruments but it from the article it is a collection of data from 16 institutions, so it could be regulated by anyone. I think the problem was that it was not regulated.

I am Irish so fairly pro-EU but believe it should be regulated in UK by FSA. I also lived in London so may be biased.

daviesee

-spider- wrote:

LIBOR is not British powers - it is Bankers powers. Where it is set will not make much difference. They were at it in London and they will probably be at it elsewhere.

Yeah.
But take the powers to Brussels and the bankers will follow.
No?

Wunnunda

Except it won't be Brussels, it'll be Frankfurt.

(Cue music from the Twilight Zone to indicate conspiracy theory)

daviesee

New alternative thought.
Well mine, but I did have 3 pints at lunch.

David Cameron is on record as saying he is going to negotiate hard with Europe, up to and including withdrawal.
Europe is now laying down the groundwork to negate any threats.

In others words, it is all a game of poker?
I can't see Cameron playing poker so he will lose one way or another.

owenlars

LIBOR stand for London Interbank Offered Rate. it is calculated daily by Thomson Reuters on behalf of the British Bankers Association and is based on the average rates from 18 global banks measured each day. It is published at 11:30 every day. There are other similar averages calculated round the world but this is the most widely used.

As stu-bim says it is not the calculation that actually matters but the confidence in the calculation so I don't think it matters where it is calculated or who calculates it.

Presumably the fact it emerged from London was to do with London being one of the three top Financial centres in the world and the happy fact that London sits smack bang in the middle of the World's time zones between the Far East Markets closing and the New York Markets opening. The question is will the EU running it somehow increase confidence in it? I doubt it somehow.

I don't think most people in London want to stay in Europe. I suspect most of them couldn't care less judging by election turn outs. Big business would prefer us to be in the Euro as it simplifies accounting and reduces currency risk.

TheStone

The impact on normal borrowers of the LIBOR fixing is hugely overplayed.

Historically LIBOR tracks base rates. The banks were mostly understating their overnight rates to make their bank look safer and keep closer to the base rates. The central banks dropping rates by 5% is a much bigger deal than banks understating by what? 0.01%? 0.02%?

daviesee

^^^^^

Fair enough. Something does have to be done one way or another.

Still smells of power stripping to me though and the business guy on BBC news at 5:50 didn't look too enthralled at the idea.

jedster

I wont bother adding to what others have said on Libor except - I agree, this is no big deal.

On the topic of London and Europe I would say that most financial institutions hate the idea of the UK leaving the EU. Basically, the UK provides a lot of the financial services used by, say, German automanufacturers when they want to borrow money, hedge currency exposure, handle export contracts, etc. The question is, will some of this business move to Frankfurt if we leave the EU? I think so.

The fact is that these financial institutions directly or indirectly pay a lot of the bills in London (retailers, restaurants and all the people who work in them would be worse off if these businesses suffered). It may be true that a lot of Londoners are relaxed about us leaving the EU but I dont think they should be...

wandsworth

It's a difficult one. Benchmarks like LIBOR have become a big political issue since the rigging scandal last year. Increased regulation of LIBOR one way or another is therefore inevitable. On the other hand, the 'continentals' (especially the French) have long wanted to reduce the influence of London as a financial centre. This could be seen as one part of that, though not a major one. Not worth leaving the EU for. The proposed Financial Transaction Tax is a much bigger issue, though we'll see if it ever actually gets off the ground.