On September 28, the UK Treasury released the Final Report of the Wheatley Review of LIBOR setting out recommendations for LIBOR reform. (The Wheatley Review, headed by Martin Wheatley, the CEO-designate of the Financial Conduct Authority, was launched in mid-August (see the August 17, 2012, edition of Corporate and Financial Weekly Digest).
The Review recommends that:
- Administering LIBOR and submitting rates should become regulated activities under the UK’s financial services regime.
- Persons performing key roles in the submission of rates and the administration of LIBOR should be registered with the UK Financial Services Authority (FSA).
- Manipulation of LIBOR should be made a specific criminal offense under the investigation and prosecution power of the FSA.
- The British Bankers Association should transfer responsibility for LIBOR to a new administrator.
- The new administrator should introduce a code of conduct for submitters, including systems and controls, transaction recordkeeping responsibilities and providing for external audit of submissions.
- LIBOR submissions be explicitly and transparently supported by transaction data.
- LIBOR for currencies and tenors with insufficient trade data to corroborate submissions be phased out.
- Publication of individual submissions change from current daily publication alongside the LIBOR rate to publication after a delay of at least three months.
- Measures be taken to increase the number of banks participating in the rate submission process.
- UK regulators work closely with their European and international counterparts to establish and promote clear principles for effective global benchmarks.
The Treasury minister, Greg Clark, said that the Wheatley Review had made a series of “comprehensive and practical recommendations” designed to restore LIBOR’s credibility. Any necessary legislative changes will be considered for inclusion in the Financial Services Bill which is currently before Parliament or the Banking Reform Bill which will be introduced shortly.