FSA Finalizes New Rules for Financial Benchmarks
The Financial Services Authority (FSA) has finalized new rules and regulations for financial benchmarks. This follows the recommendations of the Wheatley Review of the London Inter-Bank Offered Rate (LIBOR).
Martin Wheatley, CEO designate of the FCA, said, “Confidence and trust are critical to financial markets. That trust has been eroded by the LIBOR scandal and the recent enforcement action against several banks. These new rules today should help restore that faith and bring integrity back to LIBOR.”
The FSA said benchmarks are used across financial markets in a broad range of activities. They have historically been set by the financial markets themselves, and existed outside of any regulatory regime. In the case of LIBOR, this industry-led approach has failed. On July 2, 2012 the Chancellor of the Exchequer commissioned Martin Wheatley, CEO designate of the Financial Conduct Authority (FCA), to undertake a review of the structure and governance of LIBOR and the corresponding criminal sanctions regime.
On 28 September 2012 “The Wheatley Review of LIBOR” was published, which included a 10-point plan for comprehensive reform of LIBOR including that LIBOR activities should be brought within the scope of statutory regulation. The Government has subsequently inserted provisions into the Financial Services Act 2012 to allow the regulation of activities in relation to benchmarks. The legislation will commence on 1 April 2013. Initially, the only specified benchmark will be LIBOR.
Following a consultation, the FSA has now finalized proposals for the regulation and supervision of specified benchmarks, such as LIBOR, implementing a key recommendation of the Wheatley Review.
The key proposals include: