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Report: Libor may have been affected by low-balling dollar calculation

By Riley McDermid, MarketWatch

Last Update: 9:36 AM ET May 29, 2008

NEW YORK (MarketWatch) - Banking giants including Citigroup Inc., J.P. Morgan
Chase & Co. and UBS AG are contributing to erratic behavior in a major global
lending benchmark, The Wall Street Journal reported Thursday.

Citi (C), J.P. Morgan (JPM) and UBS (UBS) are all members of a 16-bank panel that
reports rates used to calculate the London interbank offered rate, or Libor, in
dollars. An analysis of those 16 banks by the Journal suggests they may have been
reporting much lower borrowing costs than they should have been, judging by
another market measure.

Libor is supposed to reflect the average rate at which banks lend to each other.
Instead the benchmark has recently artificially projected that the banking system
was doing better during the global credit crisis than it actually was, the paper
reported.

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