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Government sets ‘challenging’ timetable for LIBOR report

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The inquiry into the LIBOR rigging scandal has just two weeks to come up with its initial report, the Government has said.

The Chancellor of the Exchequer, George Osborne, has commissioned Martin Wheatley, managing director of the Financial Services Authority (FSA), to undertake a review of the framework for the setting of London Inter-bank Offered rate (LIBOR).

Osborne has given him until just the 10th August to publish a discussion paper on how LIBOR is calculated and regulated, with final conclusions due in September.

The Treasury admitted that the timetable was “challenging”, but that it would enable the government to consider recommendations with a view to incorporating changes into the Financial Services Bill, which is currently under scrutiny in the House of Lords.

Barclays was recently fined a record £290m for trying to manipulate LIBOR, a rate which details the interest banks are charging to lend money to one another.

It is also the benchmark rate for millions of financial transactions worth billions of pounds.

Other banks are set to be dragged into the mire, with Royal Bank of Scotland Chief Executive, Stephen Hester, saying he expects his bank to be fined for its involvement.

“We’ll have our day in that particular spotlight as well,” he said in an interview with the Guardian newspaper.

The Wheatley Review will look into:

– How LIBOR is constructed, including whether to use actual trade data to set the benchmark, rather than banks’ estimates

– How LIBOR is regulated

– What sanctions can and/or should be available to authorities to tackle LIBOR abuse

Wheatley said it was clear that urgent reform of the LIBOR compilation process was required.

“Such reform may include amendments to the technical definitions used for LIBOR, the associated governance framework and the role of official regulation,” he said.

“The review will also consider whether similar measures are required for other existing benchmarks.”

However, the review will not investigate the behaviour of individual banks, with the Treasury saying that was the job of FSA and other regulators around the world.

A discussion paper will be published on 10 August, stakeholders will then have four weeks to submit written responses to the review, with conclusions due to be published at the end of September.

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