Cleaned-up Libor may be secured by criminal penalties
Financial Conduct Authority wants bankers stripped of oversight role
Attempting to manipulate Libor interest rates should be made a criminal offence, Britain's chief financial regulator will say today as part of a devastating indictment of the rate-fixing scandal.
The scandal, which led to Barclays paying £290m in fines, involved traders trying to manipulate the rates on which the price of $300 trillion of financial contracts depend, to boost their bonuses.
In a speech to be delivered today to coincide with the publication of his report into the affair, Martin Wheatley, chief executive of the new Financial Conduct Authority, will describe the system as "broken" and say traders' attempts to game it have "torn the very fabric that our financial system is built on".
He will also say the British Bankers' Association should be stripped of its responsibilities for overseeing the setting of Libor as part of a 10-point improvement plan, describing its approach as "careless" and saying people were right to be upset at how "badly run" it has been.
In addition to criminal penalties for those who try to manipulate Libor, Mr Wheatley will call for new laws to bring it under regulatory oversight.
He will say that it would be impossible to scrap Libor because in many cases viable alternatives do not exist and it would cause too much disruption. But he wants to see alternatives developed in the long term.
His proposals will see a sharp reduction in the number of Libor reference rates, from 150 to around 20, with several time periods dropped, in addition to certain currencies, including the Canadian, Australian and New Zealand dollars, as well as the Swedish and Danish kroner.
Banks may also be forced to submit data to Libor, to prevent them from dropping out and getting a "free ride".
And that data should be based on actual transactions rather than what the banks expect to pay.
A committee chaired by Baroness Hogg, the chairman of the Financial Reporting Council, will be set up to select a new organisation to oversee and publish Libor rates.
Mr Wheatley will also issue a stark warning to those involved in setting other benchmarks in the City to ensure that they are kept clean. A huge range of prices, including gold, silver, some agricultural products and oil, are set without regulation and, it is feared, are susceptible to manipulation.
Mr Wheatley will say: "Whilst other benchmarks vary greatly in design and application, I hope that those responsible for them will be able to draw some important lessons from my report on Libor, and that it will help stimulate wider debate on benchmarks.
"In particular, I consider that it should be possible to develop a set of overarching principles that can be applied to all major benchmarks, to promote robustness and credibility across the markets."
Mr Wheatley will add: "Libor needs to get back to doing what it is supposed to do, rather than what unscrupulous traders and individuals in banks wanted it to do. The evidence we have seen in relation to this manipulation paints a clear and damning picture about the prevalence of the wrong incentives, and the sorts of behaviour that has allowed."
Greg Clark, Financial Secretary to the Treasury, will say of the report: "Libor is a hugely important international benchmark and this report makes a series of comprehensive and practical recommendations designed to restore its credibility. The Government will respond, in full, once Parliament returns."
- 1 Bill Clinton portrait features Monica Lewinsky reference, artist admits
- 2 What happens to your body when you give up sugar?
- 3 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 4 Have sex with your iPad thanks to the new sex toy no-one asked for
- 5 Average penis size revealed: Scientists attempt to find what is 'normal' to reassure concerned men
Bill Clinton portrait features Monica Lewinsky reference, artist admits
Japanese island overrun with cats after population explodes
China's 'Inconvenient Truth': video exposing country’s smog crisis watched 100 million times
Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
The 'sex selfie stick' lets you FaceTime the inside of a vagina
New theory could prove how life began and disprove God
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
This is what it's like to be dead, according to a guy who died for a bit
Ukip would cut billions from Scottish budget to fund English tax cuts
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
iJobs Money & Business
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...
£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...