Following publication of the Wheatley Review of the London Interbank Offered Rate on 28 September, which had been commissioned by Chancellor George Osborne, the government has chosen to accept its recommendations in full.
This means that while the setting of Libor will remain an industry-led activity, its submission to and administration will be regulated by the Financial Conduct Authority – headed up by Martin Wheatley, managing director of the FSA and author of the report.
At least initially Libor will be the only ‘regulated benchmark’ in the UK. However, the new regime could be extended to cover additional benchmarks in the future if the government deemed it appropriate, the FSA said.
Under the proposals benchmark administrators will be required to corroborate submissions and monitor for any suspicious activity and those submitting data will be required to have in place a clear conflicts of interest policy and appropriate systems and controls.
The FSA is consulting on the changes and is seeking comments on ensuring the continuity of Libor and of broadening participation in the rate.
Martin Wheatley, managing director of the FSA and CEO designate of the FCA, 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.”
