Regulator will act to restore trust after Libor rigging crisis

Britain has reformed how the London Interbank Offered Rate, or Libor is run, appointing a new administrator, NYSE Euronext, to replace the British Bankers’ Association which is being stripped of this role.

Three banks – RBS, Barclays and UBS – have been fined a total of $2.6bn for manipulating Libor with other banks expected to be punished in coming months.

Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), said tough governance rules may need to be applied to other types of benchmarks, many of which are in London such as oil and gold.

“The key issue here is that restoring confidence and trust is not simply about Libor ... it’s by no means the only one capable of knocking market confidence,” Mr Wheatley said yester- day.

“And that raises the obvious question: do we hold all benchmarks to the same broad standards, or do we allow the reputation of some to climb, others to fall?

“The danger with the latter option, I think, is that you risk the integrity of an entire system.”

Administrators will be given a year to get it right.

“But once we’ve been able to review the extent of compliance by administrators ... we’ll look again at the principles.

“We’ll also take a position on whether they can be improved or made more effective,” Mr Wheatley added.

He also co-chairs a global review at the Financial Stability Board on how to base Libor on actual market transactions rather than quotes from banks on rates they think they can borrow from each other.

The review will also look at how to shift to the new benchmark without disruption to existing contracts.