Libor Rate Fixing is broken - How to fix it !

As a result of Barclays fine for rigging the majorly important LIBOR rate (London Interbank Offered Rate), shortly to be followed by a whole raft of other large banks, the review body, headed by Martin Wheatley of the FSA, will announce proposed changes on Friday, to strengthen the regulation of this rate.

Bankers have used it to set their benchmark for various rates at which Interbank dealers will lend funds over a number of periods and it has been clearly open to abuse for a a long time.

At the heart of the financial crisis, banks were unsure whether to lend to each other as big names folded and some reported their costs of borrowing lower than the actual, to avoid giving the impression that that they were a credit risk and could easily have a liquidity problem if other banks wouldn't lend to them.

Outside of this period however, manipulation of the rate still went on, probably as a matter of daily routine and the motive behind that was pure profit and the traders involved ultimately receiving higher bonuses because of it .

There was a possibility that this rate would have been substituted by a new rate system, untainted by rigging but it appears that the review body is going to stick with this rate but maybe reduce the amount of periods it needs to cover and any future manipulation would be a criminal  action to be dealt with in the courts.

The review has taken a mere 6 weeks to complete their findings, that needs to lead to a water tight system that can be trusted globally, with all participants fully accountable and that certainly isn't the case at the moment.