Oversight of Libor will be handed to the U.K.’s financial regulator, and dozens of the currencies and maturities that make up the benchmark axed, under proposals designed to revive confidence in a rate tarnished by scandal.
The British Bankers’ Association should be stripped of the responsibility for managing the rate and other organizations invited to replace it, Financial Services Authority Managing Director Martin Wheatley said in London today. More than 100 Libor rates tied to currencies and maturities where there isn’t enough trading data to set them properly should be scrapped, and a code of conduct introduced for how lenders contribute to the benchmark backed by criminal penalties, he added.
The number of Libor reference rates should be cut to 20 from 150 within a year by phasing out currencies and maturities in which trading is thin, Wheatley said. Publication of Libor for Australian, Canadian and New Zealand dollars, as well as the Danish Kroner and Swedish Kronor should be ended, he said.
The new manager of the Libor rate should be “an “organization that won’t be conflicted, like a trade association would be,” Wheatley said.