HM Treasury has published draft amendments to the Financial Services Bill to implement the final Wheatley report on the review of LIBOR.
Amongst other things the amendments provide that:
- the submission of rates and the administration of benchmarks such as LIBOR will be regulated by the new Financial Conduct Authority (FCA);
- the making of misleading statements to manipulate benchmarks such as LIBOR will be criminal offences;
- the FCA will be given power to make rules dealing with the contribution of banks in the LIBOR setting process.
The Wheatley report recommended that the essence of LIBOR should be retained, because the introduction of a new benchmark would pose too great a risk of financial instability and contractual disputes. No doubt trade bodies such as ISDA and the LMA are already considering the extent to which their standard forms may need amendment. However it will be interesting to see how the reforms are actually put into practice and what the implications will be for existing loan agreements.