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Jul 18, 2012, 08.57 PM IST
US Treasury Secretary Timothy Geithner defended his response in 2008 to concerns over the credibility of the benchmark Libor interest rate, arguing on Wednesday that US regulators had pushed early and forcefully for reforms.
Geithner said that resolving problems with Libor would not be left just to British authorities, and that the response to his suggestions for reform in 2008 "didn't go far enough."
"We acted very early in response to the concerns that the processes to set this rate were impaired and flawed, and vulnerable to misrepresentation," Geithner said at the CNBC Institutional Investor Delivering Alpha conference.
"The U.S., to its credit, set in motion at that stage a very, very powerful enforcement response, the first results of which we have now seen," he said, adding "there is more to come."
Geithner, then head of the New York Federal Reserve, sent an email to Bank of England Governor Mervyn King in June 2008, recommending six ways to enhance the credibility of Libor after Barclays had flagged concerns as early as 2007.
The BoE passed on Geithner's thoughts in an email to the British Bankers Association (BBA) - the banking group responsible for Libor - which at that stage had already decided to launch a review of the rate.
But few of Geithner's measures were adopted, and questions linger over what U.S. and UK regulators have done since then to fix the issues with Libor.
"They took some modest reforms in response to our suggestions in '08, but they didn't go far enough. And we have now taken the initiative to set up a broader effort involving all the countries that matter around the world, that have a big stake in this, to try to make sure we push" for reforms, Geithner said.
Libor, or the London interbank offered rate, is calculated daily in London when panels of banks submit estimates of how much it costs them to borrow. It is a major index that helps judge the health of banks and influences rates from mortgages to student loans to credit cards.
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