A keenly anticipated report recommending a 10-point plan for overhauling the calculation and oversight of the key benchmark rate known as LIBOR was published Friday.

The final report from managing director of the UK Financial Services Authority (FSA), Martin Wheatley, calls for LIBOR to be reformed, rather than replaced by a new benchmark, noting that a move to a new benchmark is not justified. And, while the market manipulation scandal that set this review in motion is serious, it concludes that the benchmark can be successfully reformed.

Among other things, the report recommends that LIBOR be set based on actual transaction data, rather than banks’ estimates, that it be subject to a new oversight regime, and that there should be greater transparency into the rate setting, among other things. The report says that the British Bankers Association (BBA) should give up responsibility for calculating and distributing the rate to a new authority, which would be responsible for the surveillance of submissions, publication of a statistical digest of rate submissions, and periodically reviewing whether LIBOR is working properly.

It also recommends that this new administrator should introduce a code of conduct for banks that submit to the rate calculation to ensure that it is based on transaction data, to set controls, record keeping responsibilities, and audit requirements for submitting banks. It suggests that LIBOR not be calculated for currencies where there is insufficient trade data, and that individual LIBOR submissions should be published after three months to reduce the potential for manipulation, and to reduce any potential interpretation of submissions as a signal of creditworthiness.

Wheatley says the recommendations provide a “credible blueprint” for restoring trust in LIBOR, and that it’s now up to the UK government, the BBA, the banks and other market players to follow through. “I am well aware that it is far from the last word on the subject,” he says in the report. “However – speaking as the person ultimately responsible for conduct regulation in the UK – I am determined that the FSA and [the new Financial Conduct Authority, which he will head, starting in 2013] will do whatever is needed to restore the faith of financial markets in LIBOR.”

“I expect those with a direct interest in LIBOR – particularly those in the markets who contribute to or use the benchmark – to show the same degree of commitment to getting this right,” he adds.

In response, the UK Treasury says that the government is examining the recommendations in detail, including the costs and benefits of what has been proposed, and the design and implementation options. It intends to respond to the review when Parliament returns, and introduce any necessary legislation in a regulatory reform bill that is currently being considered by the House of Lords.

The BBA also indicated that it supports the recommendations, saying, “The BBA worked very closely with the Wheatley Review of LIBOR and believe today’s report is an essential step.”

“The BBA has strongly stated the need for greater regulatory oversight of LIBOR, and tougher sanctions for those who try to manipulate it. The BBA Council has indicated it would support any recommendation that responsibility for LIBOR should be passed to a new sponsor,” it says.

“The absolute priority now for everyone is to ensure the provision of a reliable benchmark which has the confidence and support of all users, contributors and global regulators, and we will work closely with the government and regulatory bodies to ensure this,” it adds.