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Regulators to Set Libor Audit Guidelines

The Royal Bank of Scotland will be one financial institution affected by new g

In the wake of the Libor rate-rigging scandal, in which a number of British banks were accused of fixing interest rates on interbank loans to manipulate global markets, a British accounting standards board is proposing a new set of audit guidelines to govern financial institutions' internal lending estimates.

According to Reuters, the Institute of Chartered Accountants in England and Wales has begun drafting a set of international guidelines for external auditors to follow when examining banks' lending estimates. U.K. firm Barclays agreed to undergo the audit process as part of its record-breaking $450 million settlement earlier this year, and it is likely that many of the other 15 banks under investigation by U.S. and U.K. regulators for their role in the scandal will also have to verify their Libor submissions with auditors.

Iain Coke, head of financial services with ICAEW, told Reuters there are a lot of considerations that need to be made when crafting the standards. For example, since the Libor rate is set using hypothetical transactions, accountants would have to agree on a reliable sampling method, he said.

While the Barclays settlement was the largest ever recorded in England, some financial experts predict an impending settlement with the Royal Bank of Scotland might surpass it. According to an earlier report from Reuters, officials at the majority government-owned RBS are eager to settle quickly and put the scandal behind them.