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Martin Wheatley's 10-point plan to overhaul the way the Libor market operates could eventually give him key responsibility for the ultimate oversight of a rate that affects $300 trillion (£185tn) of financial products around the world.
In calling for the government to give the Financial Services Authority powers to regulate the submission and administration of Libor, Wheatley is essentially putting himself in charge; when the FSA is disbanded next year he will head the Financial Conduct Authority (FCA) to which the responsibility will be transferred.
In the foreword to his 92-page final report, commissioned by the Treasury in the aftermath of the £290m fine on Barclays, the FSA managing director and chief executive-designate of the FCA promises "swift and decisive" action to restore confidence in the crucial benchmark rate.
The Treasury appears ready to back the proposals drawn up after a short consultation. Greg Clark, financial secretary to the Treasury, said: "Libor is a hugely important international benchmark and this report makes a series of comprehensive and practical recommendations designed to restore its credibility."
Giving the FSA regulatory powers over the submission of the rates is the first of the suggestions Wheatley makes to the government for restoring a system he describes as "broken".
Among the key other recommendations are:
• Managers who oversee the individuals who make submissions to Libor should be approved by the FSA to make it easier to discipline them.
• The British Bankers' Association should be stripped of its role in setting Libor and a tender will be put out on Friday for a successor body to replace the trade organisation that gave banks "unfettered latitude" in submitting rates. The BBA accepted its removal from a role it has held for 25 years. "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," the BBA said.
• Criminal sanctions should be introduced for anyone who attempts to manipulate Libor by amending the Financial Services and Market Act to allow the FSA to prosecute manipulation of the rate
• The new body that oversees the administration of Libor, replacing the BBA, should introduce a "code of conduct" that requires submissions to be corroborated by trade data
• Libor is set by a panel of banks asked the price at which they expect to borrow over 15 periods, from overnight to 12 months, in 10 currencies. But the proposal is to reduce the 150 benchmark rates to just 20 – in five currencies and four maturities. The report found that 52.8% of financial instruments are priced off three-month dollar Libor
• The rates the banks submit are published shortly afterwards. But Wheatley recommends more banks get involved and that the individual rates submitted should not be published for three months to avoid a rerun of 2008 when, at the height of the banking crisis, banks might have deliberately lowered rates to mask any idea they were in financial difficulty.
Wheatley himself, though, acknowledged that while his report is "final" it will not be the last word on a subject that has dominated the financial markets for three months.
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