WASHINGTON (AP) -- A top U.S. regulator is calling for an overhaul of a key global interest rate, saying consumers need more confidence that the rate is set honestly and transparently.
Gary Gensler, chairman of the Commodity Futures Trading Commission, told a European Parliament committee Monday that the process for setting London Interbank Offered Rate, or LIBOR, should change.
"It is time for a healthy benchmark," Gensler said in a speech delivered via live video to the committee. "It is time to restore the confidence of people around the globe that the rates at which they borrow and lend money and hedge interest rates are set honestly and transparently."
Gensler's remarks come months after Britain's Barclays bank admitted that it had submitted false information for LIBOR. Barclays agreed to pay a $453 million fine in settlements with the CFTC, U.S. prosecutors and British regulators.
Several other major banks, including Citigroup Inc. and JPMorgan Chase & Co. in the U.S., are also being investigated. U.S. congressional committees also are looking into possible manipulation of the LIBOR.
A British banking trade group sets the LIBOR every morning after about a dozen international banks submit estimates of what it costs them to borrow. The rate affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.
The U.S. Treasury Department said in a report issued in July that the process for setting LIBOR is flawed and poses a risk to the stability of financial markets.
The Federal Reserve Bank of New York learned five years ago of big banks understating their borrowing costs to manipulate the LIBOR. Treasury Secretary Timothy Geithner, who was then president of the New York Fed, raised concerns about the LIBOR process in 2008 with officials of the Bank of England and with U.S. regulators.
But Geithner didn't inform Congress of his concerns, which were not made public until the New York Fed released documents in July.