FSA Libor rules to take effect from 1 April
The FSA’s 1 April deadline is no joke
New rules and regulations for financial benchmarks following the Libor scandal will come into effect next Monday, says the Financial Services Authority, and will follow the recommendations of the Wheatley Review, which provides a 10-point plan for reform of the way Libor and other benchmarks are calculated.
The announcement is in line with a deadline set by the European Securities and Markets Authority and the European Banking Authority earlier this year, though it only covers Libor for the moment, rather than the wider Euribor index.
Martin Wheatley, chief executive designate of the incoming Financial Conduct Authority was commissioned to undertake a review of the structure and governance of Libor and the corresponding criminal sanctions regime, following the revelation that banks had routinely been manipulating it.
Wheatley’s report came out in September last year, and included the conclusion that Libor activities should be brought within the scope of statutory regulation. The UK Government has subsequently inserted provisions into the Financial Services Act 2012 to allow the regulation of activities in relation to benchmarks. The legislation will commence on 1 April 2013.
Following a consultation, the FSA has now finalised proposals for the regulation and supervision of specified benchmarks – initially, the only specified benchmark will be Libor – implementing a key recommendation of the Wheatley Review. The key proposals include:
- 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. This will result in clear, robust rules which will give firms and their employees comfort that the regulatory regime clarifies what is expected of them; and
- two new significant influence controlled functions created under the FSA’s Approved Persons Regime for the administrator and submitting firms.
The Policy Statement can be found on the FSA website.
