The UK’s Financial Conduct Authority (FCA) has announced its new methodology for examining traders’ behaviors in an effort to curb the risk of benchmark manipulation, part of its overall Business Plan for the new year, according to an FCA statement.
The newly released business plan underscores a widespread initiative by regulatory firms in the aftermath of the London Interbank Offered Rate (LIBOR) scandal that roiled financial firms over the past year, along with a plethora of new responsibilities necessitated by a dynamic market. However, the paramount goal of the new review will be heightened oversight and the administering of effective controls on key benchmark trading activity.
According to FCA Chief Executive Martin Wheatley at a recent speech in a UK Conference, “Following widespread attempted manipulation of LIBOR, firms should ensure that traders are not able to act in this way in the future. We are determined that firms need to take the matter of manipulation of any benchmark seriously and will be working with firms to seek out any issues that may remain.”
Changes Across Investment Banking
Institutional firms and global investment banks, including Deutsche Bank, Barclays and UBS, conducted the paramount abuses over the LIBOR manipulation. In this realm, the FCA will examine the transfer of sensitive information, ensuring the transparent processing of all confidential information across financial firms. Furthermore, this will entail diligent oversight on the behavior of asset managers and traders to foster the execution of proper market conduct on behalf of investors.
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“Over the next year we will increase the intensity with which we supervise wholesale conduct to ensure that transactions undertaken by these firms do not have a harmful impact on market integrity,” Wheatley added.
FCA to Assume New Responsibilities
The litany of abuses reported over the previous year has ultimately necessitated a greater role by the FCA itself, which has invariably lead to a host of new responsibilities for the regulatory body in 2014. Apart from the tighter oversight on investment banks, the FCA will also be shifting its focus towards consumer credit – such channels as financial promotional validity, short-term credit and lending practices are also to be included.
Indeed, “Taking on the regulation of consumer credit is an enormous task which effectively doubles the number of firms that we regulate. Using our new power we want to tackle harm to consumers who are most at risk and our work will focus on protecting vulnerable consumers,” Wheatley reiterated.
In addition, the FCA has also outlined the following foci in its Business plan for the next year:
- Mortgage Market review
- Consumer Protection mechanisms
- Implementing the measures stipulated by the Financial Services Act of 2013
- The launch of Payment Systems Regulator
- The establishment of comprehensive LIBOR supervision
- Engagement with Alternative Investment Fund Management Directive (AIFMD)
- Enhancement of whistleblowing activity