Jail for rate riggers may be enshrined in EU law this year

Rate Manipulation

Barnier’s plans would also set financial penalties for attempted rate manipulation. The European Commission is also seeking views on possible rules to overhaul Libor, Euribor and other market benchmarks.

EU regulators are weighing options such as forcing banks to provide real transaction data rather than estimates and increasing the number of lenders involved in the rate setting.

While there are alternative benchmarks available, “none represent a silver bullet,” Joanna Cound, head of government affairs for Blackrock Inc., said at the hearing. “We believe that a greater diversity of benchmarks is appropriate.”

Swaps Probe

A commission investigation into the pricing of credit- default swaps will also conclude as soon as possible, Almunia Said today.

Scrutiny of credit-default swaps intensified after Greece’s rating was cut to junk status by Standard & Poor’s in 2010. The downgrade added urgency to European plans to bail out the debt- plagued nation.

Credit-default swaps are derivatives that pay the buyer face value if a borrower -- a country or a company -- defaults. In exchange, the swap seller gets the underlying securities or the cash equivalent. Traders in naked credit-default swaps buy insurance on bonds they don’t own.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Bloomberg News

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