Administering benchmarks
Administering benchmarks

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Administering benchmarks
  • Background to the regulated activities relating to benchmarks
  • Defining 'regulated benchmarks'
  • Specified activities and benchmarks prior to 1 May 2020
  • Providing information in relation to a specified benchmark prior to 1 May 2020
  • Administering a specified benchmark prior to 1 May 2020
  • Administering benchmarks post 1 May 2020
  • Potential exclusion
  • The business test and links to the UK
  • UK approach to regulating benchmarks

Background to the regulated activities relating to benchmarks

The London Inter-Bank Offered Rate (LIBOR) is a global benchmark for short term interest rates. The benchmark is often written into standard derivative and loan documentation and has increasingly been used for a range of retail products such as mortgages. As far back as 2005, there has been evidence of banks seeking to manipulate LIBOR (see the Financial Services Authority (FSA)'s final notice in relation to Barclays). Following numerous concerns about the way LIBOR was functioning, in 2009 the FSA, along with other overseas regulators, started to investigate a number of institutions for alleged misconduct relating to LIBOR, the Euro Inter-Bank Offered Rate (EURIBOR) and other benchmarks. As part of its response to these investigations, in July 2012, the UK Government established an independent review into the setting and usage of LIBOR. The review was led by Martin Wheatley, then managing director of the FSA and former CEO of the Financial Conduct Authority (FCA).

The Wheatley Review identified a number of failings in the production and oversight of the process of determining LIBOR, which at the time was administered by the British Bankers' Association (BBA) and self-regulated by the BBA and contributing banks. In particular, the Wheatley Review noted that the conflicts of interest presented by self-regulation had clearly facilitated the conduct identified in the investigations. Consequently,

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