Financial Benchmark Regulation - Papers

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Financial Benchmarks, IOSCO
First Report Released Consultation Released Comment Deadline
January 11, 2013 April 16, 2013 May 16, 2013

Discussions surrounding possible changes in the regulation of financial benchmarks such as the London Interbank Offered Rate (LIBOR) began in 2012, in the wake of an ongoing scandal involving widespread manipulation of rate submissions by participant banks. While the initial round of fines assessed by regulators such as the CFTC and U.K. Financial Services Authority against Barclays, UBS and the Royal bank of Scotland concentrated on manipulation of LIBOR, the scandal has since widened to include other financial benchmarks such as Euribor, Yen Libor and Swiss Libor.

In January 2013, the International Organization of Securities Commissions (IOSCO) published a consultation report and request for comment on financial benchmarks. The report, which included 41 questions upon which market participants are invited to comment, is IOSCO's first step in the setting of policy guidance and principles for benchmarks. On April 16, 2013, IOSCO released its draft Principles for Financial Benchmarks. Comment letters can be foundHERE.

This page contains an aggregation of white papers and research reports, consultations and other studies related to the regulation of financial benchmarks.

IOSCO Consultation Report on Financial Benchmarks, January 2013[edit]

On January 11, 2013, IOSCO published a consultation report and request for comment on the policy issues related to the work of the task force.

The report explores the concerns regarding the potential for inaccurate submission and/or manipulation of financial benchmarks such as LIBOR, EURIBOR, TIBOR and similar benchmarks. Topics discussed in the report include:

  • The appropriate level of regulatory oversight of the process of benchmarking;
  • Standards that should apply to methodologies for benchmark calculation;
  • Credible governance structures to address conflict of interests in the benchmark setting process within the reporting financial institutions as well as in the oversight bodies; and
  • The appropriate level of transparency and openness in the benchmarking process.
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Principles for Financial Benchmarks - IOSCO, April 2013[edit]

On April 16, 2013, the International Organization of Securities Commissions (IOSCO) released a consultation paper, Principles for Financial Benchmarks, which seeks public comments on a set of high-level principles for benchmarks used in global financial markets. The consultation covers 18 principles in four areas, including governance, benchmark quality, quality of the methodology, and accountability. The principles are based partly on conversations with and comments from market participants subsequent to the January 2013 consultation report.

The closing date for public comments is May 16, 2013.

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The Effect of Underreporting on LIBOR Rates - Federal Reserve Bank of St. Louis, February 2013[edit]

On May 29, 2008, the Wall Street Journal reported that several large international banks were reporting unjustifiably low LIBOR rates. Since then two large banks, Barclays and UBS, have paid significant fines for manipulating their LIBOR rates, and additional banks are expected to be fined. This paper investigates whether the underreporting of LIBOR rates by some banks significantly affected the reported LIBOR rate by testing whether there was a significant change in the relationship between the LIBOR rate and another rate that reflects the default risk of banks.

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