BBA to hand over administration of LIBOR to Intercontinental Exchange Benchmark Administration Ltd
17 Jan 2014
The BBA’s board voted unanimously to approve the transfer of the administration of LIBOR to the new administrator as recommended by the Hogg Tendering Advisory Committee on 9th July 2013 and has been working since then to ensure a smooth transition. The BBA will hand over administration of the benchmark on 1st February 2014 following FCA approval.
The appointment of a new administrator was one of the key recommendations of the Wheatley Review which was set up in 2012 following the revelations of attempts to manipulate LIBOR. The BBA has worked hard to implement all the recommendations of the review in order to restore confidence in LIBOR as a benchmark.
Commenting on the announcement, BBA Chief Executive Anthony Browne said:
“Restoring confidence in LIBOR has been an absolute priority for the BBA since I took over as Chief Executive. We have been working hard with regulatory authorities and the Government to put in place much-needed reforms to the system.
“The BBA worked closely with the Wheatley Review into LIBOR, then with the Hogg Committee and latterly with ICE Benchmark Administration Ltd. Today's announcement is a further step in restoring the credibility of the rate. The BBA has strongly stated the need for greater regulatory oversight of LIBOR, and tougher sanctions for those who try to manipulate it. That is why the BBA Council agreed that responsibility for LIBOR should no longer lie with the BBA.
“The benchmark now has better regulatory oversight and improved governance.”
Notes to Editors
- BBA LIBOR Limited is the current Interim Administrator of the LIBOR Benchmark providing on-going support for the collection, calculation and distribution of LIBOR rates.
- The Wheatley Review, published in September 2012 looked at the structure and governance of LIBOR. The review and the recommendations in the 10 point plan were welcomed by the BBA and by the government. Recommendation 2 of the Wheatley Report stated that:
“The BBA should transfer responsibility for LIBOR to a new administrator, who will be responsible for compiling and distributing the rate, as well as providing credible internal governance and oversight. This should be achieved through a tender process to be run by an independent committee convened by the regulatory authorities.”
Full details of the Wheatley Report’s findings on this issue are set out in Chapter 3, paragraphs 3.5 to 3.16. A full copy of the report is available here.
- BBA LIBOR Ltd began a consultation in November 2012 on how initial changes would be implemented. A phased discontinuation of certain LIBOR currencies and maturities were proposed. The streamlining of LIBOR tenors and currencies during the early months of 2013 resulted in the number of rates published daily, reducing from 150 to 35.
- The Hogg Committee was set up in February 2013 to independently oversee a tender process to recommend a new administrator for LIBOR. The BBA worked with the Committee during the tender process and BBA LIBOR Ltd became regulated as the interim administrator of LIBOR on 2nd April 2013.
- From 1st July 2013, the BBA implemented Wheatley’s recommendation to embargo the rates submitted by individual panel banks for 3 months.
- On 9th July 2013, the BBA board voted unanimously to approve the transfer of the administration of LIBOR to the bidder recommended by the Hogg Tendering Advisory Committee. BBA LIBOR Ltd has engaged constructively with the new administrator to ensure a smooth transition.
- The BBA LIBOR published Code of Conduct included formal adoption of the Wheatley’s guidelines for the LIBOR submission process. On 12th July 2013, Issue 1 of the Interim Code of Conduct for Contributing Banks was confirmed as Industry Guidance by the FCA.
- The new administrator will take over a benchmark with better regulatory oversight and improved governance.
- While the BBA is not directly involved in the process, the Bank of England is sponsoring and supporting work which aims to improve benchmark design and administration. Professor Daryll Duffie of Stanford University is leading this work