Firms are still not doing enough to strengthen governance and monitor supervision of benchmarks, according to a report from the UK regulator.
The Financial Conduct Authority (FCA) today released its Thematic Review of Financial Benchmarks and warned that firms were interpreting the IOSCO definition of benchmark activities to narrowly.
In a statement released to the market, Tracey McDermott, director of supervision – investment, wholesale and specialists at the FCA said: “We have seen widespread historic misconduct in relation to benchmarks. It is now critical that firms act to restore trust and confidence in the system.
“Firms should have in place systems to manage the risks posed by benchmark activities and to address the weaknesses that have previously been identified.”
McDermott added that while the regulator understood the improvements represent a significant task for the industry, it was important that consistency and speed of implementation were monitored.
She said: “Firms should take our findings on board and consider further steps to improve their oversight. Some firms have not made sufficient effort to properly identify the conflicts of interest that arise from their businesses and benchmark activities.”
Specifically, the FCA laid out five key recommendations in the Review:
- Firms needs to strengthen governance and oversight
- Firms should identify and manage conflicts of interest
- Firms should identify benchmark activities across ALL business areas
- Firms should establish in-house controls for in-house benchmarks
- Firms should put training procedures in place for staff