In the wake of the Libor rigging scandal, the government has given the go ahead for proposals to overhaul the interbank lending rate.
Greg Clark, Financial Secretary to the Treasury, confirmed that the Coalition has given its backing to a series of recommendations from the Financial Services Authority (FSA) which will ensure that lenders who attempt to manipulate the Libor will face “the full force of the law”.
The move comes after Barclays was fined a staggering £290m for its part in the Libor fixing scandal. Libor and Euribor form the basis of trillions of pounds worth of financial transactions.
At least 12 banks, including RBS and Deutsche Bank AG, are being investigated for manipulating Libor and related benchmarks.
The series of proposals outlined by FSA managing director Martin Wheatley include transferring responsibility for setting Libor from the British Bankers’ Association (BBA) to a new Financial Conduct Authority, which is set to come into operation next year.
Mr Wheatley has also recommended that those who deliberately attempt to manipulate the market for their own gains should face up to seven years in prison and a multi-million pound fine.
Speaking yesterday, Mr Clark said: “The Government is determined to restore the credibility of Libor, which is why we have accepted Martin Wheatley’s recommendations in full and will begin the process of implementing them without delay.
“’The Government’s changes to legislation will ensure that those that attempt to manipulate Libor face the full force of the law. But this is just one part of the process; the banks and the BBA will have to play their part to ensure that reform is effective and Libor’s reputation is restored.”
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