| LONDON, July 28
LONDON, July 28 Britain's government is expected
to spell out on Monday the scope of a root and branch reform of
Libor, the interest rate benchmark that was rigged by Barclays
in a widening scandal that has damaged London's
standing as a finance centre.
The UK Treasury is set to announce the remit for a review of
the rate at which banks are willing to lend to one other that is
being carried out by Martin Wheatley, a top official at the UK's
Financial Services Authority regulator.
Wheatley will look at how Libor is set and whether it should
be based in future on actual transactions. He will also look to
reform how the rate setting process is governed and how it
should be supervised in future.
Currently, the rate is self-regulated by its sponsor, the
British Bankers' Association, a situation which has sparked a
transatlantic blame game.
Regulators have been fending off accusations from
policymakers that they failed to take action when the rate did
not appear to work during the 2008 financial market meltdown,
one of the periods covered in a settlement with the authorities
under which Barclays paid a record fine.
Wheatley has said he would look at other market benchmarks
which are not directly supervised, without mentioning names.
Market participants say he could look at benchmarks in the
energy markets, which the European Union's executive European
Commission said this week it will also review as part of its own
deepening probe into interest rate benchmarks.
The BBA was already reviewing Libor before the Barclays fine
was announced. That review is set to be folded into Wheatley's
work. He is expected to come forward with draft recommendations
around Aug. 10 to a short public consultation.
His final proposals, due at the end of the summer, are
expected to be inserted into the financial services bill now
working its way through parliament to put in place next year a
new system of financial supervision in Britain.
The overhaul will see the FSA being replaced with a
prudential regulator at the Bank of England and a new stand
alone Financial Conduct Authority that Wheatley will head.
FSA Chairman Adair Turner said this week that Libor setting
was now as honest as it could get but that the structure of the
rate setting needed changing.