‘It is clear that urgent reform of the Libor compilation process is required,’ says Martin Wheatley of the Financial Services Authority. Hardly a revelation: it’s been clear since Barclays was fined for its part in the manipulation. Some were even pushing for reform back in 2008, such as the then-president of the New York Fed (now Obama’s Treasury Secretary) Tim Geithner.
But it is significant that Wheatley is saying this now, as he’s been tapped by George Osborne to lead a review of how Libor is set. The FSA hardly has much credibility on this — even Mervyn King is keen to pass the buck to them — but Wheatley only joined in 2011, and so is one of the few unsullied people at the top of the financial regulation world. His team will have to work quickly: they’re due to publish their recommendations for a new Libor framework by the end of September.
The Wheatley Review is very specifically focused on Libor and how to create a measure less susceptible to manipulation. Of course, in the process we will no doubt hear more of the abuses by Barclays, RBS et al, but it’s really more about the changes needed on the regulatory side. For more exposition of the rotten culture within the banking sector, we have Andrew Tyrie’s Parliamentary Commission on Banking Standards. Take, for example, the first question in its initial call for evidence: ‘To what extent are professional standards in UK banking absent or defective?’ Expect some juicy answers to that one.
Comments