12/09/2013 09:22 BST | Updated 12/09/2013 09:23 BST

Libor Rate To Remain In London, Despite Rate-Rigging Scandal

The Swiss Re Insurance building, also known as 'the Gherkin', foreground, and the towers of the Canary Wharf business district are seen against the city skyline in London, U.K. on Thursday, July 12, 2012. Banks being probed for attempting to rig benchmark interest rates could face $6 billion of related litigation costs, analysts at Morgan Stanley estimated. Photographer: Jason Alden/Bloomberg via Getty Images

London could still keep control of the Libor interbank lending rate after EU officials backed down on their plans to put it under the control of a Paris-based supervisor.

Financial regulators from the European Commission initially were calling for the direct supervision of Libor to be taken away from London and given to Paris, to be run by the European Securities and Markets Authority. However, recent drafts of their report indicate they have ditched the plan.

This comes after the City of London's banking sector was hit by a Libor rate rigging scandal, with workers across many banks implicated in the mis-reporting of the interbank lending rate. The scandal has led to banks being fined millions of pounds, as well as staff being arrested in connection with rate-rigging.

Senior banking figures like former Barclays CEO Bob Diamond were forced to resign.

A revised version of the European Commission's proposals offers a watered-down proposal which means London would keep primary oversight of Libor, as reported by the Financial Times.

However the Commission will propose that a group of supervisors from various EU member states would have a role in overseeing Libor, given the risk of further abuse potentially affecting markets across the European Union.

The climbdown will be chalked up as good news for the Treasury, who have lobbied behind the scenes to kill off the mooted Libor reforms.