Some Libor fixing hard to spot, says FSA's Lord Turner
Spotting whether the Libor inter-bank rate was being manipulated by minute amounts before 2007 would have been "prohibitively expensive", the head of the financial watchdog has said.
Lord Turner, chairman of the Financial Services Authority (FSA), also hit out at the "cynical greed" of bank traders.
He also questioned the practice of free banking, saying it discouraged competition between banks.
He was giving a speech on "banking at the crossroads" to Bloomberg News.Improving supervision
In recent weeks it has emerged that banks sought to manipulate the Libor rate - London Inter-bank Offered Rate - which is supposed to measure the average rate that banks have to pay to borrow from their rivals.
Lord Turner said that while the role of regulators in the later part of the scandal was still under debate, in the period before 2007 it would have been nearly impossible for them to spot manipulation.
"There is a debate as to whether the authorities could have been more alert to the 2007 and 2008 manipulation - and I will not comment on that today," he said.
"But in relation to the earlier period, to the manipulation of rates by a minute amount for a short period in either direction, I do not believe these problems could have been spotted from outside except via supervision so intensive as to be prohibitively expensive."
He added that he believed the problem of rigging Libor was in the past but that regulators must now work on improving supervision.
"I would be very amazed if at the moment there is anything remotely like the problems of the past in terms of deliberate manipulation but that still leaves us the problem of superstructure built on inherently judgemental and thin market."
He also pointed out that free current accounts provided a barrier to entry into the UK retail banking sector as the core product - the current account - "is usually given away for free", prompting banks to try to make profits by pushing other products.
He said this could lead to more mis-selling scandals, "the PPIs of the future", he said, referring to the mis-selling of payment protection insurance.
Lord Turner, who is a member of the Bank of England's Financial Policy Committee, has been talked about as a potential successor to Sir Mervyn King as governor of the central bank.