By Simon Miller
The governor of the Bank of England Mervyn King has questioned the need for a single panel to set the interbank lending rate.
Speaking at the Inflation Report press conference this morning, King questioned whether there is a need for a single rate panel as interbank lending has dried up.
"Ever since the crisis there has been no such thing as a lending rate between banks. The dominant thing is credit risk so the idea of having a single panel doesn't make sense," he said.
King pointed out that currently many maturities and currencies may only get a few trades a week rather than the hundreds needed to get a proper rate.
He added: "Does it make sense for the hundreds of billions of contracts to be linked to something that doesn't exist?"
"The real people who should be thinking about this is the people that take out the contracts such as pension funds," King continued.
While saying that it was up to regulators and the Serious Fraud Office to examine the extent of Libor manipulation, King warned that no single regulator could change Libor due to contract law.
"There is an enormous amount of contracts out there based on Libor and one thing that people must understand is that no one regulator will be able to change these private contracts without serious lawsuits against them," he said.