We have an objective to ensure that markets work well. Benchmarks are used across the globe and it is vital that regulators take coordinated steps to improve market integrity.
The FCA has powers to regulate benchmarks specified by HM Treasury, currently:
- LIBOR (London Interbank Offered Rate) a key interest rate benchmark
- SONIA (Sterling Overnight Index Average) and RONIA (Repurchase Overnight Index Average), which both serve as reference rates for overnight index swaps
- WM/Reuters 4pm London Closing Spot Rate, which is the dominant global foreign exchange benchmark
- ICE Swap Rate (formerly known as ISDAFIX), which is the principal global benchmark for swap rates and spreads for interest rate swap transactions
- LBMA Gold Price and the LBMA Silver Price, which determine the price of gold and silver in the London market
- ICE Brent Index, traded on the ICE Futures Europe (IFEU) exchange, which acts as a benchmark for the crude oil futures market.
The regulatory landscape
Since the first LIBOR-related FCA enforcement action in June 2012, the FCA has played a leading role in domestic and international initiatives to raise regulatory standards for financial benchmarks.
The first regulatory regime for benchmarks, starting with LIBOR, was introduced in April 2013, and later expanded to include seven additional benchmarks in April 2015. We are also actively engaged in supporting EU and wider international reforms.
Timeline and key milestones
- The Chancellor commissioned the FSA to conduct the Wheatley Review of LIBOR in July 2012.
- The review, published in September 2012, recommended that contributing to and administering LIBOR should become regulated activities; and that a new administrator for LIBOR should be appointed. Powers to regulate LIBOR became effective in April 2013.
- The FCA co-chaired work by the International Organisation of Securities Commissions (IOSCO) to propose Principles for Financial Benchmarks. These were finalised in July 2013, and the FCA participated in IOSCO’s reviews of how effectively these standards have been applied to key benchmarks and across the market.
- The FCA also co-chaired the Financial Stability Board’s July 2014 work on reforms to interest rate benchmarks, and continues to work closely with international partners to ensure implementation of the recommendations.
- The Fair and Effective Markets Review (FEMR) was established by the Chancellor in June 2014, to conduct a comprehensive and forward-looking assessment of the way wholesale financial markets operate. Published in June 2015, it included recommendations that seven major benchmarks should be regulated in addition to LIBOR, effective from 1 April 2015.
- We have been supporting HM Treasury on the development of the new EU Benchmarks Regulation which was published in the Official Journal of the EU on 29 June 2016.
- We are closely involved with the work of the ESMA Benchmarks Task Force responsible for developing level 2 standards and technical advice under the EU Regulation.
Future policy reforms
We will continue to engage with international bodies and regulators, with HM Treasury and with the Bank of England on domestic and international policy initiatives, including the application of the EU Benchmarks Regulation in the UK.