On December 5, the UK Financial Services Authority (FSA) announced a consultation on its new regulatory framework for financial benchmarks – CP12/36 The Regulation and Supervision of Benchmarks. This follows on from the work of the Wheatley Review of the London Interbank Offered Rate (LIBOR) (as reported in the September 28, 2012, and October 19, 2012, editions of Corporate and Financial Weekly Digest).
The FSA has considered both the Wheatley Review recommendations and the Government’s proposed legislation in designing an approach to regulating benchmarks. At least initially, the only “regulated benchmark” in the UK will be LIBOR. However, the proposals provide a framework for regulation that can be extended to cover additional benchmarks in the future.
The proposals include:
a requirement for benchmark administrators to corroborate submissions and monitor them for any suspicious activity;
a requirement for those submitting benchmark data to implement appropriate systems and controls including a clear conflicts-of-interest policy; and
the creation of two new significant influence-controlled functions for the benchmark administrator and submitting firms under the FSA’s Approved Persons Regime.
CP12/36 also seeks comments on ensuring the continuity of LIBOR and broadening participation in the rate setting. The consultant period closes on January 16, 2013.