UK considers broader scope for benchmark rules

The UK government has launched a consultation on whether it should extend its regulation of Libor to other key financial benchmarks.

The UK government has launched a consultation on whether it should extend its regulation of Libor to other key financial benchmarks.

Extended regulation of financial benchmarks follows some early recommendations from the Fair and Effective Markets Review, launched by the Treasury, Bank of England and Financial Conduct Authority in June this year.

While the review, which draws on insights from market participants and users of wholesale financial services, is not due to be published until June 2015, British chancellor George Osborne has opted to push ahead with reforms of benchmarks to ensure London operates the highest standards necessary to remain a key financial services hub.

Proposed rules cover key benchmarks affecting index swaps, foreign exchange, interest rate swaps, precious metals and oil.

The benchmarks that will fall under the new rules are the Sterling Overnight Index Average, Repurchase Overnight Index Average, WM/Reuters 4pm London Fix, ISDAFix, London Gold Fixing, LMBA Silver Price and the ICE Brent futures contract.

Economic secretary to the Treasury, Andrea Leadsom, said: “Ensuring that key rates that underpin financial markets are robust, and that any who seeks to manipulate them is subject to the full force of the law is vital. That’s why the government is determined to deal with abuses, tackle the unacceptable behavior of the few and ensure that markets are fair for the many who depend on them.”

The consultation will run until 23 October and the government plans to hold targeted industry roundtables to discuss the new rules. It hopes the new regime will be in place by the end of the year.

Following the Libor scandal, where it was discovered bank employees had been manipulating the numbers they submitted for the key interest rate benchmark in order to profit from it, tough new rules were outlined for how Libor should be administered.

Additionally, responsibility for management of Libor was transferred away from the British Banker Association and to ICE Benchmark Administration, run by US exchange operator Intercontinental Exchange.

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