The U.K. government began a public consultation on its plans to overhaul Libor, the benchmark used to set rates for more than $300 trillion of securities, the Treasury said.
The exercise seeks the views of industry and the public on legislation to implement Financial Services Authority Managing Director Martin Wheatley’s recommendations, the Treasury said in a statement in London today.
Under the proposals, which are expected to become law early next year, the Treasury will give legal force to the way the London interbank offered rate is set, create a criminal offense for those who misreport it and give regulators the power to oversee the setting of the rate and other financial-industry benchmarks. The British Bankers’ Association, the industry lobby group that compiles Libor, will give way to a new rate-setting panel.
“The government has acted swiftly and is implementing Martin Wheatley’s recommendations as quickly as possible, introducing legislation that brings Libor within the scope of regulation and creating new criminal sanctions for attempted manipulation of Libor,” Financial Secretary to the Treasury Greg Clark said. “Recent events have illustrated that Libor might not be the only benchmark subject to attempted manipulation. We are consulting on whether further benchmarks should be brought with the scope of regulation.”
Wheatley began the review after Barclays Plc (BARC) paid a record 290 million-pound ($464 million) fine in June for manipulating Libor. At least a dozen banks are being probed worldwide over allegations they colluded to manipulate the benchmark to profit from bets on derivatives.
The public consultation ends on Dec. 24, the Treasury said.
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