You can now read 5 articles in a month for free on BostonGlobe.com. Read as much as you want anywhere and anytime for just 99¢.

Following scandal, Libor gets new administrator

But some say key gauge is flawed, needs replacing

NEW YORK — The administration of a distinctly British institution is being handed over to a US company. The parent company of the New York Stock Exchange won a contract Tuesday to administer and improve the benchmark interest rate known as Libor, long run by the British Bankers’ Association.

That could help provide a fresh start for Libor, or the London interbank offered rate, which is used to determine the cost of short-term loans around the world. The banks that help set the rate each day have been accused of conspiring to rig the rate for their own benefit, leading to billions of dollars in fines and a few arrests.

Continue reading below

The London Stock Exchange was among the four companies that bid for the Libor contract, said a person briefed on the process, who spoke on the condition of anonymity.

Regulators are taking a broader look at the integrity of the financial data that the global financial system relies on. Libor has already been substantially changed, but some regulators in the United States have said that Libor is too flawed to be fixed and should be replaced.

The job of fixing Libor will not be an easy one. The benchmark is supposed to represent the rate at which banks lend money to each other on an unsecured basis. This is difficult, given that banks have generally been unwilling to make unsecured loans to each other since the financial crisis.

Gary Gensler, chairman of the Commodity Futures Trading Commission, has said that financial institutions should move away from Libor — which he calls a “fiction” — and use benchmarks derived from some sort of transaction.

One of his fellow CFTC commissioners, Bart Chilton, was critical of the decision to continue allowing Libor to be administered by a company in the financial industry.

“We had a fox-guarding-the-henhouse issue here, and we should learn from that,” Chilton said. “I firmly believe that having a truly neutral third-party administrator would be the best alternative, and I’m not sure that an exchange is the proper choice.”

Loading comments...
Subscriber Log In

We hope you've enjoyed your 5 free articles'

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week
Marketing image of BostonGlobe.com
Marketing image of BostonGlobe.com
Already a subscriber?
Your city. Your stories. Your Globe.
Yours FREE for two weeks.
Enjoy free unlimited access to Globe.com for the next two weeks.
Limited time only - No credit card required!
BostonGlobe.com complimentary digital access has been provided to you, without a subscription, for free starting today and ending in 14 days. After the free trial period, your free BostonGlobe.com digital access will stop immediately unless you sign up for BostonGlobe.com digital subscription. Current print and digital subscribers are not eligible for the free trial.
Thanks & Welcome to Globe.com
You now have unlimited access for the next two weeks.
BostonGlobe.com complimentary digital access has been provided to you, without a subscription, for free starting today and ending in 14 days. After the free trial period, your free BostonGlobe.com digital access will stop immediately unless you sign up for BostonGlobe.com digital subscription. Current print and digital subscribers are not eligible for the free trial.