LIBOR becomes a regulated activity

2 Apr 2013

On 2nd April, secondary legislation comes into force amending the Regulated Activities Order, making “the administering of, and providing information to, specified benchmarks” a regulated activity under FSMA [the Financial Services and Markets Act 2000]. Initially, the only specified benchmark is BBA LIBOR. This means that until a new LIBOR administrator is appointed, the part of the British Bankers’ Association responsible for overseeing this benchmark becomes regulated. This statutory amendment in no way affects the manner in which LIBOR data is distributed, but it does mark another significant stage in the implementation of the Wheatley Review‘s recommendations.

Since the Review was published in September 2012, the BBA has been fully committed to implementing its recommendations and working to ensure a smooth transition to a new administrator. This has so far involved consulting on streamlining the number of LIBOR currencies and maturities, so that instead of ten currencies and 15 maturities there will be five currencies and seven maturities quoted every day. The last rates for the New Zealand dollar were published at the end of February, and the final publication of Swedish Kroner and Danish Krone rates occurred last Thursday (28th March). At the end of May, the Canadian and Australian dollar rates will also cease publication. We are also announcing today that, with effect from today (2nd April 2013), Euro LIBOR rates and Euro same-day LIBOR rates will no longer be published on UK bank holidays. This brings Euro LIBOR into line with all other LIBOR currencies.

A further recommendation of the Wheatley Review of LIBOR stated that: “The BBA should publish individual LIBOR submissions after three months to reduce the potential for submitters to attempt manipulation, and to reduce any potential interpretation of submissions as a signal of creditworthiness.” The BBA will be fully implementing this recommendation with effect from 1st July 2013, meaning that from this date individual LIBOR submissions from banks will no longer be immediately viewable.

In addition to the changes outlined above, the BBA is currently in the process of updating its website to reflect this new regulatory environment. During this transitional period the old BBA LIBOR website will remain publicly available; however visitors will now see a page explaining that all information on the site refers to the previous regulatory environment and should be used for personal reference only.

British Bankers’ Association chief executive Anthony Browne said:
“We believe these changes taken together reflect our commitment to meeting the absolute priority for everyone involved in this process, from users to regulators - the provision of a reliable benchmark which has the confidence and support of all users.”