“Those with a direct interest in Libor – particularly those in the markets who contribute to or use the benchmark” will be expected to show the same degree of commitment to getting it right, he added in a thinly veiled threat.
The City Watchdog’s hard-hitting regulator, who earlier this week set his sights on the ‘hidden fees’ within the asset management industry, was asked to do an independent review of Libor by Chancellor George Osborne in light of the revelations on its manipulation at the hands of banks.
“I regard this as an issue with far-reaching implications for international financial markets, not least because of the risk to London’s status as a leading global financial centre,” Wheatley said in the foreword to his report on Libor.
In his work at the Conduct Business Unit within the FSA he has been working with regulators in the US, Japan, Switzerland, the EU and elsewhere in a combined effort to address alleged Libor manipulation.
More to come
Barclays was the first bank to be fined for the role it played in what is thought to be a systemic massaging of the rate for the benefit of these corporations. It was slapped with the FSA’s largest ever fine and additionally faced a penalty from the US Commodity Futures Trading Commission, which had worked in partnership with a number of other US regulators.
This week reports emerged of instant messages between traders working at RBS in Singapore laughing at their ability to move Libor through their submissions, but no other bank has yet been fined or implicated by authorities.
In his report Wheatley said the “reset button” must be pressed on Libor to “get back to what this reference rate is supposed to do”.
Under his proposed system banks would still submit their Libor rates, but these would not be made public for three months and to make sure lenders are telling the truth, submissions would be based on real transactions checked by external auditors.
In addition, staff responsible for Libor entries will be vetted by the regulator and face being struck off, fined or prosecuted if they break the rules.
