Martin Wheatley, who is leading a review for the U.K. Treasuryinto how Libor is governed, may recommend that bankers who makesubmissions to the benchmark should be regulated, said a personwith knowledge of the plans.

Employees who submit the estimates that are the basis of therate would become subject to approval by Britain's FinancialServices Authority, said the person, who asked not to be identifiedbecause the talks are private. Wheatley, a managing director at theFSA, is set to unveil his proposals on Sept. 28.

He began the review at the request of Chancellor of theExchequer George Osborne after Barclays Plc, Britain'ssecond-biggest lender, paid a record 290 million-pound ($470million) fine in June for manipulating the London interbank offeredrate. The British Bankers' Association, the London-based lobbygroup that oversees the rate, yesterday signaled it will give upresponsibility for the benchmark following claims tradersmanipulated the benchmark. Libor is used to set rates for at least$300 trillion of securities.

“There is going to be much more regulatory oversight of Libor inthe future,” said Simon Maughan, a banking analyst at OlivetreeSecurities Ltd. in London. “There will be a new trade body tooversee the rate. You will also see a marked reduction in thenumber of rates set from the 12 different time periods currentlyrequired, as some of them are so illiquid.”

Libor is calculated by a poll carried out daily on behalf of theBBA that asks firms to estimate how much it would cost to borrowfrom each other for different periods and in different currencies.The top and bottom quartiles of quotes are excluded, and those leftare averaged and published for individual currencies before noon inLondon.

The BBA's role as guardian of Libor has been under pressuresince the Bank for International Settlements first raised concernin 2008 that the benchmark was being manipulated. At least a dozenbanks are being probed by regulators worldwide over allegationsthey colluded to manipulate the benchmark to profit from bets onderivatives.

“The existing mechanisms for Libor have fallen into disreputeand are no longer viable,” said Kevin Burrowes, U.K. financialservices leader at PricewaterhouseCoopers LLP in London. “The newLibor mechanism will need to be robust, afford greater levels ofconsumer protection than was the case previously, and subject togreater oversight and scrutiny.”

Internal Review

The BBA started an internal review of the benchmark last year asbanks started to disclosing that they were being probed byregulators over rate-rigging. As recently as June, that panel wasset to resist calls to overhaul the rate by basing it on actualtransactions and instead favored a beefed-up code of conduct andincreased oversight, three people briefed on the talks said at thetime.

In its submission to the Wheatley-led review, the BBArecommended that Libor be based on actual trades rather thanguesswork and that it should publish rates for fewer currencies,Sky News reported today.

Wheatley said last month that material changes to the way Liboris calculated and published risks invalidating millions offinancial contracts, covering products ranging from mortgages toderivatives.

“Any migration to new benchmarks would require a carefullyplanned and managed transition in order to limit disruption to thehuge volume of outstanding contracts that reference Libor,”Wheatley said in August following a speech at Bloomberg LP's officein London.

Dan Doctoroff, chief executive officer of Bloomberg LP, hasproposed an alternative to Libor dubbed the Bloomberg InterbankOffered Rate, or Blibor. It would use data from a variety offinancial transactions to better reflect participating banks' realcost of credit. Bloomberg LP is the parent of Bloomberg News.

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