Libor is “structurally flawed” and an international effort would be needed to restore the rate’s credibility as the benchmark for mortgages, derivatives and corporate lending around the world, Ben Bernanke, US Federal Reserve chairman, told Congress yesterday.
In his first public testimony since Barclayspaid $460m in penalties for attempting to rig the London interbank offered rate, Mr Bernanke said US central bankers first became concerned about “problems” with Libor toward the end of 2007, when market rumours first began to circulate that banks were understating the rates at which they could borrow.
“The Libor system is structurally flawed,” Mr Bernanke said. “It is a major problem for our financial system and for the confidence in the financial system?.?.?.?we need to address it.”