London Inter-Bank Offered Rate (LIBOR): the Wheatley Review

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On 28 September 2012, HM Treasury published the final report on the review of the London Interbank Offered Rate undertaken by Martin Wheatley, FSA Managing Director and Chief-Executive designate of the Financial Conduct Authority (FCA).  The review was tasked with looking at the structure and governance of LIBOR and to make recommendations on how the system should be reformed. This can be viewed as a response to the manipulation of LIBOR rates undertaken by various banking personnel which came to light in April 2012.

Key conclusions:

  • The Review favours comprehensively reforming LIBOR rather than replacing it.
  • Transaction data should be explicitly used to support LIBOR submissions.
  • Market participants should continue to play a significant role in the production and oversight of LIBOR.
  • The BBA should no longer run LIBOR and there will be a tendering process for a new administrator.
  • There will be guidelines developed to govern LIBOR submissions and a Code of Conduct to be developed and run by the administrator.
  • In the meantime banks, when submitting, should take into consideration the sort of transactions set out in the Report when contributing their rates.
  • The submission of rates to LIBOR and the administration of LIBOR will become regulated and subject to FSA enforcement and criminal prosecution.
  • There will be further work internationally with European, US and other authorities to develop a global approach to the regulation of LIBOR and other global benchmarks…

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