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LIBOR reforms – an update (May 2013)

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Arnondo Chakrabarti



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14 May 2013

In the January 2013 Risk Note, we set out various proposals that had been published by the FSA in relation to the reform of the regulation and supervision of LIBOR. Since then, the majority of these proposals have been finalised.

Implementation of the new regulatory framework for the regulation and supervision of LIBOR

On 1 April 2013, the administration of and provision of information to a specified benchmark became a regulated activity for the purposes of the new Regulated Activities Order (the RAO). At present, the RAO limits the definitions of "regulated benchmarks" to LIBOR. However, the new legislation has left it open for the Government to expand these definitions to include other benchmarks in the future.

Shortly before the RAO came into force, the FSA published a Policy Statement (PS13/6) which outlined the regulatory framework it (and now its successor, the Financial Conduct Authority (FCA)) has adopted in relation to the regulation and supervision of LIBOR (the Policy Statement). This new regulatory framework took effect on 2 April 2013

There are three key themes which appear to run through the various new requirements which comprise the new regulatory framework set out in the Policy Statement:

Good governance:

LIBOR administrators and submitters are required to implement and maintain governance and oversight procedures in relation to the administration of and submissions to LIBOR. The FSA has also created two new SIF Controlled Functions to be held by those who are responsible for administering LIBOR (CF50) and those who have oversight of LIBOR submissions made by a firm (CF40).


LIBOR administrators and submitters are expected to monitor and survey benchmark submissions with a view to identifying breaches of practice standards and/or potentially manipulative conduct. Firms are required to notify the FCA of any suspicions they have regarding manipulation of or attempts to manipulate LIBOR.

Management of conflicts of interest:

LIBOR submitters are required to put in place organisational arrangements within their firms for managing conflicts of interest which may arise within or outside of the firm in connection with LIBOR submissions.

The rules and guidance which now govern the FCA's approach to regulating and supervising LIBOR are set out in a new chapter (Chapter 8) to the FCA's Code of Market Conduct (MAR) and a new section of the FCA Handbook entitled "General Guidance on Benchmark Submission and Administration" (BENCH).

In the Policy Statement, it was made clear that private persons will not be able to pursue private rights of action under s138D of the Financial Services and Markets Act 2000 in order to seek damages from firms who contravene the rules relating to benchmark administration and submission in MAR 8.

Selection of a new LIBOR administrator

On 25 February 2013, HM Treasury announced the membership of an independent committee (the Hogg Tendering Advisory Committee (the Hogg Committee)) which has been tasked with recommending a new administrator for LIBOR.

The pre-tendering questionnaire process for LIBOR administrators closed on 22 March 2013 and the Hogg Committee has indicated that it may be in a position to announce a new LIBOR administrator by this summer.