The UK Financial Services Authority (FSA) Monday finalized a set of new rules and regulations for financial benchmarks, in response to the interbank lending rate manipulation scandal.
The FSA says that the historic approach of allowing financial firms to set the benchmarks, such as the London Interbank Offered Rate (LIBOR), without regulatory oversight has failed.
As a result, following a review headed by FSA executive and CEO designate of the new Financial Conduct Authority (FCA), Martin Wheatley, the FSA is adopting a number of reforms.
Under its proposals: benchmark administrators will be required to corroborate submissions and monitor for any suspicious activity; those submitting data to benchmarks will be required to have in place a clear conflicts of interest policy and appropriate systems and controls; and, it will introduce new regulated functions for the administrator and submitting firms.
Since the Wheatley Review was published in September 2012, the UK government has inserted provisions into its financial services legislation to allow the regulation of benchmarks, which takes effect April 1. Initially, the only specified benchmark will be LIBOR.
“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,” said Wheatley.