Friday, 28 September 2012

UK: Wheatley Review of LIBOR - final report published

Martin Wheatley, the chief executive designate of the new Financial Conduct Authority, has published his proposals for the reform of the London Inter-Bank Offered Rate (LIBOR) setting process: see here (pdf).

Comprehensive reform of LIBOR, rather than its replacement, is advocated. The report proposes, amongst other things, that market participants should continue to play a major role in the production and oversight of LIBOR. However, it recommends that a new administrator (a private organisation not a public authority) should be formed to take over responsibility for LIBOR from the British Bankers' Association. It also recommends that administration of LIBOR, and the submission of rates, should be subject to greater statutory regulation. It is, for example, suggested that section 397 ("Misleading statesments and practices") of the Financial Services and Markets Act 2000 should be amended to cover manipulation of LIBOR. With regard to banks' submissions, one of the main findings of the report is that these should be explicitly and transparently supported by transaction data. A short video, in which Martin Wheatley sets out his proposals, is available below (with acknowledgements to the BBC). The text of the speech he delivered this morning is available here.

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Note: The setting of interbank rates in other countries is also under review, including, for example, EuriborSIBOR, BUBOR and HIBOR.

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