The BBA, an unregulated trade group, has been under pressure to overhaul the 24-year-old system after the Bank for International Settlements said in a March report some members understated their rates to avoid being perceived as having difficulty raising financing and the credit crunch. Financial products worth about $150 trillion are indexed to Libor, according to the BBA's web site.
"The absence of any concrete decisions now will surprise a number of market participants,'' said Ciaran O'Hagan, a fixed- income strategist at Societe Generale in Paris. "With action not forthcoming just now, this gives space for other index initiatives to flourish.''
The BBA fell short of the type of changes to Libor that investors said could have ranged from removing banks that are found to misrepresent their borrowing costs to the group to adding an extra survey each day to reflect trading in U.S. hours.
"The committee will be strengthening the oversight of BBA Libor,'' the London-based organization said in an e-mailed statement yesterday.
Lesley McLeod, a spokeswoman at the BBA in London, declined to elaborate on the statement other than to say the association views the issue "very seriously indeed and will be progressing as soon as possible.''
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WARY OF LENDING
Libor gained attention last August as banks suddenly became wary of lending to each other because of mounting losses linked to US subprime mortgages. The three-month Libor soared to 2.40 percentage points above yields on Treasury bills on August 20, the widest margin since December 1987 and up from 0.39 percentage point a month earlier. The spread was 0.8 percentage point yesterday.
In the first four months of 2007, the difference between the highest and lowest rates for three-month dollar Libor didn't exceed 2 basis points, or 0.02 percentage point, according to JPMorgan Chase. In the same period this year, it was as wide as 17 basis points.
Every morning, the London-based BBA asks member banks how much it would cost them to borrow from each other for 15 different periods, from overnight to one year, in currencies from dollars to euros and yen. It then calculates averages, throwing out the four highest and lowest quotes, and publishes them at about 11:30 am in London.