The Financial Services Authority (FSA) has proposed new “clear, robust rules” for financial benchmarks following the Wheatley LIBOR Review
Initially Libor will be the only regulated benchmark in the UK, but under the new rules, regulation can be extended by government to cover additional benchmarks in the future.
In addition, administrators will monitor any suspicious activity, a conflict of interests policy and appropriate systems are to be implemented, and two new significant influence functions for the administrator and submitting firms will be created.
Martin Wheatley, managing director of the FSA, said, “confidence and trust” are critical to financial markets.
“The disturbing events uncovered in the manipulation of LIBOR have severely damaged that trust. Today’s proposals will bring in clear rules for the setting and governance of benchmarks and are a key step to ensuring the integrity of LIBOR,” he added.
In September ‘The Wheatley Review of Libor’ was published, which included a 10-point plan for comprehensive reform of LIBOR.
One of its key recommendations was that while the setting of LIBOR should remain an industry-led activity the submission to, and administration of, it should now be regulated by the Financial Conduct Authority.
Last month the government announced that it will adopt all the recommendations from the review and amended the upcoming Financial Services Bill accordingly.
As a result, anyone who makes misleading statements in relation to benchmarks such as LIBOR will be committing a criminal offence.
Wheatley was asked to carry out an independent review by the Treasury after Barclays was fined £290m in June for manipulating Libor. Bank employees had been using the system to signal their perceived institutional creditworthiness or to support trading positions.
Government adopts Wheatley in full
FSA tightens mortgage lending rules
LIBOR manipulation to be criminalised
FSA clamps down on mis-selling culture