Wheatley LIBOR report recommends ten-point reform plan | Practical Law

Wheatley LIBOR report recommends ten-point reform plan | Practical Law

HM Treasury has published the final report on the review of the London Interbank Offered Rate (LIBOR) undertaken by Martin Wheatley, FSA Managing Director and Chief-Executive designate of the Financial Conduct Authority (FCA). (Free access)

Wheatley LIBOR report recommends ten-point reform plan

Practical Law UK Legal Update 7-521-5978 (Approx. 3 pages)

Wheatley LIBOR report recommends ten-point reform plan

by PLC Financial Services
Published on 28 Sep 2012 • United Kingdom
HM Treasury has published the final report on the review of the London Interbank Offered Rate (LIBOR) undertaken by Martin Wheatley, FSA Managing Director and Chief-Executive designate of the Financial Conduct Authority (FCA). (Free access)
On 28 September 2012, HM Treasury published the final report on the review of the London Interbank Offered Rate (LIBOR) undertaken by Martin Wheatley, FSA Managing Director and Chief-Executive designate of the Financial Conduct Authority (FCA), following the August 2012 discussion paper (see Legal update, Wheatley review discussion paper outlines LIBOR reform initial thinking).
The report sets out a ten-point plan for the reform of LIBOR, which includes:
  • New regulation. The administration of, and submission to, LIBOR should be regulated activities, and controlled functions in relation to these activities should be created. Also, section 397 of the Financial Services and Markets Act 2000 (FSMA) should be amended to enable the FSA to prosecute manipulation, or attempted manipulation, of LIBOR.
  • Overhaul of the way LIBOR is run. The British Bankers' Association (BBA) should transfer responsibility for LIBOR to a new administrator. The new independent administrator should fulfil specific obligations as part of its governance and oversight of LIBOR. It should also introduce a code of conduct for submitting banks. Until the code is finalised, submitting banks should refer to the suggested submission guidelines set out in the report, in the determination of their LIBOR submissions.
  • Reforms to the LIBOR mechanism. These include the BBA (and in future, the new administrator) ceasing to compile and publish LIBOR for currencies and tenors for which there is insufficient data to corroborate submissions. Also, the BBA should publish individual LIBOR submissions after three months to reduce the potential for submitters to manipulate the market.
HM Treasury has updated its webpage on the review and this includes a full set of responses to the discussion paper. A summary of the responses is set out in Annex B to the report.
The government will respond to the report when Parliament returns (on 15 October 2012). It has indicated that any necessary legislative changes will be included in the Financial Services Bill 2012-13 (FS Bill) or, according to an HM Treasury press release, the Banking Reform Bill. The FSA will work closely with the BBA and banks to ensure that the recommendations addressed to market participants are implemented.
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