Oversight of the London interbank offered rate will be handed to Britain's financial regulator under proposals designed to revive confidence in a benchmark tarnished by scandal.
The British Bankers' Association should be stripped of the responsibility for managing the rate and other organisations invited to replace it, Financial Services Authority managing director Martin Wheatley said yesterday.
More than 100 Libor rates tied to currencies and maturities where there is not enough trading data to set them properly should be scrapped, and a code of conduct, backed by criminal penalties, introduced for how lenders contributed to setting it, he said.
"Governance of Libor has completely failed," Wheatley said as he unveiled a report on the future of Libor. "This problem has been exacerbated by a lack of regulation and a comprehensive mechanism to punish those who manipulate the system."
Wheatley began his review at the request of Chancellor of the Exchequer George Osborne after Barclays, Britain's second-biggest lender, paid a record £290 million (HK$3.65 billion) fine in June for manipulating Libor, which is used to set rates for more than US$300 trillion of securities.
The Financial Services Authority should receive greater powers to vet bankers who contribute to the rate, according to Wheatley.
He stopped short of advocating scrapping Libor, saying that would be too disruptive to borrowers whose existing contracts referenced the rate.