WRAPUP 1-BBA says to beef up supervision of its Libor rates
ju4 wa4i dia4n zo1ng he2 ba4o da4o :\n  NEW YORK/LONDON, May 30 (Reuters) - The group in charge of\nsetting Libor interest rates said on Friday it will strengthen\noversight of the global interbank lending benchmark, months\nafter it became seriously distorted by the credit crisis.\nThe British Bankers Association said on its website that\ndetails will be published in "due course," adding it had made\nno changes to the list of banks that contribute to its\nrate-setting process for London interbank offered rates, known\nas Libor.\nThe BBA brought forward its annual review by around a\nmonth, after facing growing criticism that its Libor rates\npriced in U.S. dollars understated true bank-to-bank borrowing\ncosts. Some had called for the BBA to raise the current number\nof U.S. bank contributors to more than three out of 16.\nInter-bank lending costs have soared since the credit\ncrisis broke last summer as financial institutions grew wary of\nlending to one another. Libor, however, has fallen dramatically\nover the course of the crisis. On Friday, it fell as U.S.\ninvestment banks held onto their cash ahead of the end of the\nquarter.\nThe BBA's review had been widely expected to recommend\ntweaks rather than drastic changes to the process of deriving\nits benchmark rates so as not to destabilize markets that use\nLibor as a reference.\n"This is even a smaller band aid than expected. ... It's\nfrustrating to see people who don't understand how bad the\nsituation is," said Christopher Low, chief economist at FTN\nFinancial in New York.\nAbout $150 trillion worth of financial products around the\nworld -- everything from auto loans to corporate debt --are\nindexed to Libor.\nMarket participants had reckoned the potential changes the\nBBA could unveil might include: increasing the number of banks\nin the BBA's daily survey; using a median rather than a trimmed\nmean to calculate the Libor rate; including more U.S. banks on\nthe rate-fixing panel; altering the survey question to shift\nthe definition of the rate; changing the time of the fix from\n11 a.m. London time to better align it with the U.S. market;\ncreating an indexed-like Euribor for the dollar.\nBecause banks do not currently need to prove they can trade\nat the yields they submit to the BBA survey, some analysts also\nbelieve the BBA may base the fixing of its Libor rates on\ntraded ones.\nBut the BBA made no such changes, and also opted to keep\nthe current bank panel members as they are.\nU.S. contributors include Bank of America <BAC.N>,\nCitigroup Inc <C.N> and JPMorgan Chase & Co <JPM.N>.\nDespite the fall of almost five basis points on Friday,\nLondon interbank offered rates for overnight dollar funds\nposted their biggest weekly rise since the first week of the\ncredit crunch in August last year.\nThey remain more than half a percentage point above the\nFederal Reserve's 2 percent overnight target rate.\nU.S. investment banks helped drive up the cost of\nshort-term dollar funds this week as they scrambled to hold\ncash on their books for accounting purposes at the end of their\nsecond quarter reporting period on Friday.\n(Reporting by Ian Chua and Richard Leong; Editing by Leslie\nAdler)\n((ian.chua@reuters.com; 44 207 542 1028; Reuters Messaging:\nian.chua.reuters.com@reuters.net))\nKeywords: LIBOR BBA