2013.03.1807:04:13UTC+00Central banks want Libor replaced with several rates

Barclays, Royal Bank of Scotland (RBS) and UBS have all been fined for rigging the London interbank offered rate, which regulators are now reforming. A global group of central bankers said that the tarnished Libor interest rate benchmark should be replaced with a range of reference rates based on actual market transactions by banks

The rate is compiled by banks submitting quotes for the rates at which they believe they could borrow from another bank. It is used to price products worth trillions of dollars, ranging from home loans to credit cards, but central bankers signalled that its days ought to be numbered.

"It is clear that central banks must play an important role in supporting the development of alternative reference rates," Bank of England Governor Mervyn King said in a statement.

Central banks can promote alternative rates such as overnight rates and overnight index swaps rates, or general collateral repo rates, the report said. These refer to contracts between banks based on expected interest rates.

Some regulators remain cautious about a rapid shift to market-based transactions, given the huge volume of contracts still using Libor, while others say that such a move is overdue.
"In certain cases, central banks or supervisory authorities could become more actively involved in producing reference rates," the report said.