Carney says he will take up issue of reforming scandal-plagued LIBOR system

OTTAWA – Mark Carney says he has held talks with global officials on how to fix the interbank lending system known as LIBOR and will take up the matter in September at the next meeting of the Financial Stability Board.

The Canadian central banker, who heads the Swiss-based FSB, says he agrees with his U.S. counterpart Ben Bernanke that LIBOR is structurally flawed.

The London interbank offered rate, which is used as a benchmark to set other interest rates, has been discredited recently by evidence that some of the banks that set LIBOR have provided false information.

British bank Barclays shocked the financial world this spring when it agreed to pay a US$453 million fine for its part in the scandal.

The problems are believed to go much further, however, and investigations are underway in the United Kingdom, the United States and even Canada to see how many banks were involved.

Carney calls the allegations and facts that have emerged so far as “deeply troubling,” but while the probe continues, he says it’s up to policy-makers to address the flaws in the system.

He says it’s too early speculate on what the fix may be, or even if LIBOR can be fixed, but added it’s essential that confidence be restore in the operations of the global financial system.