British banking bosses and MPs have reacted with dismay to news that responsibility for setting the LIBOR inter-banking rate has been handed to the owner of the New York Stock Exchange (NYSE). Future control of the protocol – which is used for pricing £192 trillion-worth of financial products around the world – was the subject of much conjecture following last year’s revelations that a number of banks had routinely rigged it for their own benefit. As a result of Barclays’ involvement in the scandal, Bob Diamond resigned as group chief executive. Following a bidding process that began in April, LIBOR setting will now move from the British Bankers Association (BBA) to London-based NYSE subsidiary Euronext.

Anger has greeted the decision, with stakeholders questioning the apparent aspersions it casts on the City of London’s regulatory abilities. Labour MP John Mann stated: “This is a tremendous blow to the prestige of the City of London and sends out the message that you can’t trust the British. What the Americans have been doing is selectively picking out British banks that have done wrong and selectively ignoring the same scandals that have been committed by their own banks.”

However, this is arguably an overreaction: since the scandal came to light there have been changes in the way that LIBOR is calculated, with more empirical evidence used, rather than opinion. This should ensure that it is much harder to rig as time goes on, which should make its administration a formality. And while that ongoing management has been outsourced, the format of the rate has still been devised in the UK.

The most important step now is to provide that, whichever body is in charge of the rate, it should be keenly watched to avoid any repeat of the rigging, and with City watchdog the Financial Conduct Authority (FCA) performing this duty, the ultimate responsibility still lies with London.

Image of the New York Stock Exchange building courtesy of Daryl Lang / Shutterstock.com