(Bloomberg News) U.S. financial regulators are examining the indexes used in the $3.7 trillion municipal bond market, after an investigation in the U.K. found that bankers rigged a widely used benchmark for worldwide interest rates.

The Municipal Securities Rulemaking Board, or MSRB, which crafts regulations for banks that deal state and local government bonds, said today it plans to study how municipal- debt indexes are put together. The regulator said it had no indication of manipulation, and that the review seeks to educate investors about indexes used to gauge yields on municipal bonds.

"Like other regulators, the MSRB is concerned about the transparency surrounding the development of market indices," Alan Polsky, the group's chairman, said in a statement. "We plan to review indices used by the municipal market -- and develop educational materials about their use -- to ensure that the market operates fairly and transparently."

Officials in the U.S. and the U.K. are investigating how bankers set the London Interbank Offered Rate, or Libor, an index that is used to determine interest rates on trillions of dollars of debt and derivatives, including contracts purchased by states and cities. At least a dozen banks are being investigated by regulators, while Barclays Plc was fined in connection with the probe.

Libor Concerns

The MSRB review is in response to concerns about the integrity of financial market indexes such as Libor, according to the statement.

The MSRB develops regulations and relies on the U.S. Securities and Exchange Commission to bring action against those who run afoul of its rules.

At its quarterly meeting last week, the board decided to study the processes used to develop key municipal market indexes, saying it wants to provide investors with information needed to evaluate how best to use them.

Separately, the MSRB said it would seek additional disclosures from underwriters about donations they make to election campaigns seeking to persuade voters to approve bond issues. Those donations can foster the perception that public officials are awarding work to banks that contribute to the campaigns, according to the MSRB.

Reporting Contributions

Underwriters are currently required to report such contributions, though not the connection to subsequent work. The additional disclosures may include payments underwriters receive from bond issues approved by voters, Polsky said.

"Some observers would like to see the board ban contributions, but it's important to know that there are some important First Amendment rights that have to be considered, as well as the need for the MSRB to demonstrate a clear connection between contributions and the award to underwriting firms," he said.

Regarding its review of the municipal bond market's indexes, Polsky said he had no reason to believe they are subject to the type of manipulation at the center of the Libor probe.

Among those the board will evaluate include indexes developed by: Municipal Market Data, a Thomson Reuters company; Municipal Market Advisors Inc.; and the Securities Industry and Financial Markets Association. He didn't indicate whether the MSRB would review municipal market indexes produced by Bloomberg LP, the parent of Bloomberg News.

It's important that investors "understand how these indices are prepared, that there's transparency in their creation and that there's appropriate education," Polsky said. "I don't think there's a smoking gun. I don't think that that's the implication in the review."