Oversight of Libor should be handed to the U.K.’s financial regulator, and dozens of currencies and maturities that make up the benchmark should be cut, Britain’s markets chief said.
Bloomberg reports that organizations will be invited to bid to take over the day-to-day running of the London interbank offered rate from the British Bankers’ Association, Martin Wheatley said. He also proposed immediate changes, including ending more than 100 Libor rates tied to currencies and maturities where there isn’t enough trading data to set them properly. He said that bank submissions should be allowed to retain 'some level of judgment' and be based on 'hard data'.
'Governance of Libor has completely failed, resulting in the sort of shameful behavior that we have seen', Wheatley said in prepared remarks for a speech today in London. 'This problem has been exacerbated by a lack of regulation and a comprehensive mechanism to punish those who manipulate the system'.
Wheatley, managing director of the Financial Services Authority, began the review at the request of Chancellor of the Exchequer George Osborne after Barclays Plc, Britain’s second-biggest lender, paid a record $470m fine in June for manipulating Libor, which is used to set rates for at least $300 trillion of securities.
Wheatley recommended greater powers for the FSA, including requiring rate-submitters to be vetted by the regulator. He is slated to become the chief executive officer of the Financial Conduct Authority, when the FSA splits into two separate agencies next year.
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