Bankers' Body Urged To Merge After Libor Loss

Britain's banking lobby group is under pressure to consider a merger with another trade body as it seeks to fill a funding deficit triggered by the loss of its role setting the interbank borrowing rate Libor.

I have learned the British Bankers' Association (BBA) has been urged by a number of banks to examine a combination with the Council of Mortgage Lenders (CML) or another trade association.

The issue was discussed at a recent BBA board meeting, according to my sources, and is expected to form part of a new strategy for the banking group that will be unveiled by Anthony Browne, its chief executive, next year.

The BBA, which does not publicly disclose its accounts but circulates them among its members on an annual basis, generates millions of pounds each year from selling licences to data providers to allow them to publish Libor benchmark data.

Fees for membership of the BBA are paid on a sliding scale dictated by a bank's size, with major high street lenders such as Barclays (LSE: BARC.L - news) and Royal Bank of Scotland (LSE: RBS.L - news) paying the largest sums. Insiders say the biggest banks pay several million pounds a year to fund the BBA's work.

It is unclear what proportion of the BBA's income is generated by Libor-related activities, but one bank executive said the major lenders were reluctant to pay more to replace the lost revenue.

"They have to cut their cloth," the banker said.

The BBA's council voted in September to relinquish its role in setting Libor rates following the scandal which engulfed Barclays in June.

The UK bank paid £290m in fines for attempting to manipulate Libor rates before and during the 2008 financial crisis, and heavy penalties for other banks are expected to follow from regulators around the world before the end of the year.

The Government has said it will implement the recommendations of a review by Martin Wheatley, head of the new Financial Conduct Authority, for Libor rates to be overseen by a new body. Companies, including Bloomberg, have expressed an interest in taking on a role in the new Libor-setting regime.

Sources close to the BBA insisted it was not in talks about a merger or other alliance with the CML, although insiders confirmed such a move had been explored under the leadership of Angela Knight, Mr Browne's predecessor, who now runs the utilities' lobbying group, EnergyUK.

In a statement issued to Sky News, the BBA said: "We are confident any changes to BBA revenues can be managed efficiently and we are currently exploring options to propose to our board."

A CML spokeswoman said it was not in talks about merging with the BBA.