The Financial Services Authority's Martin Wheatley will take one of the first steps to cleaning up the banking industry's reputation after the Libor scandal today when he publishes an initial discussion paper on his review of Libor. Wheatley is likely to confirm what it appears Sir Mervyn King, his deputy Paul Tucker and Angela Knight of the British Bankers' Association already suspected back in 2008: that Libor as it currently stands is 'no longer fit for purpose'.
The FT reports that Wheatley will suggest scrapping Libor altogether and replacing it with a rate based on actual trades that would be overseen by a new independent body. This would remove the 'incentive to manipulate' Libor that Timothy Geithner highlighted. He has also told Reuters that transactions should also move away from using Libor to 'alternative benchmarks'.
The FSA's investigations into Libor manipulations by banks other than Barclays have not yet reported back, and the speed at which the Wheatley review is being conducted shows that the regulator and the Treasury are aware that swift action is needed, to protect London's reputation as much as anything else.